Multiples Question

Got potential interview questions on multiples that I'm confused about. Would appreciate the help!

  1. Why would you use P/E multiples over EV based multiples like the EBITDA, EBIT, or Revenue multiple?
  2. Are higher multiples better or worse or is there like a range at which its considered a good multiple? ( for P/E and EV based multiples)
3 Comments
 
  1. Google it, this is a BIWS 400 guide question and if you're interviewing, you should review that.
  1. Depends on the context of what this question is getting it. Multiples are just multiples, there’s no inherent “better or worse” without asking about a specific situation, like “is it better or worse for a buyer?” A buyer would rather pay a lower multiple, seller would rather receive higher. Higher multiple usually to reflect higher growth, margins, or other attractive characteristics
 
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