Got potential interview questions on multiples that I'm confused about. Would appreciate the help! Why would you use P/E multiples over EV based multiples like the EBITDA, EBIT, or Revenue multiple? 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)

PE multiples are better used for equity valuations with stock analysis, and EV/EBITDA is better used for company valuation with M&A. It is still recommended to weigh the multiples of both to value a company. “The P/E ratio does not reveal a full picture, and it is most useful when comparing only companies within the same industry or comparing companies against the general market. The EV/EBITDA ratio helps to allay some of the P/E ratio's downfalls and is a financial metric that measures the return a company makes on its capital investments.

Multiples Question

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

Why would you use P/E multiples over EV based multiples like the EBITDA, EBIT, or Revenue multiple?
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

Sinner G

PE

3y

Google it, this is a BIWS 400 guide question and if you're interviewing, you should review that.

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

Reply

Quote

Report

Other

Authored by: Certified Private Equity Professional - 1st Year AssociateCertified Private Equity Pro

beltran33

?

3y

I've reviewed the BIWS thoroughly but I just don't understand the situations where a P/E multiple is used over an enterprise value multiple or vice versa.

Reply

Quote

Report

Other

mcblin

IB

3y

Most Helpful

Amet ad inventore veritatis sunt totam sapiente in harum. Ducimus qui iste aut et illum ut. Iste corrupti deleniti et. Minima occaecati neque nihil aut odio numquam alias perferendis. Esse ab aut porro natus doloremque explicabo. Atque et quia doloribus eaque.

Reply

Quote

Report

Other

+173	Evercore > Goldman and I don’t think it’s particularly close anymore	63	2h
+156	Article: Why UBS's Asian M&A bankers are thriving and UBS's American M&A bankers are not	17	19h
+125	I am a drunk MD AMA	40	1d
+87	UBS Offer Day	30	1d
+75	Santander IB?	10	3d
+71	I hate Wells Fargo	19	20h
+51	No return offer - feeling like a failure is an understatement	20	15h
+50	Think Twice before Recruiting for HOUSTON IB!!	18	3h
+48	How cooked am I as an incoming WF IB SA 2027?	17	12h
+46	WF Return offers	28	2d

1	redever	99.2
2	Secyh62	99.0
3	kanon	99.0
4	BankonBanking	99.0
5	CompBanker	98.9
6	DrApeman	98.9
7	dosk17	98.9
8	GameTheory	98.9
9	Betsy Massar	98.9
10	Kenny_Powers_CFA	98.8

Elite Career Bootcamp. Top Job Offer Guaranteed.

Elite Career Bootcamp. Top Job Offer Guaranteed.

Multiples Question

Elite Career Bootcamp. Top Job Offer Guaranteed.

Elite Career Bootcamp. Top Job Offer Guaranteed.

Multiples Question

See All Comments - 100% Free

Trending Content - Investment Banking Forum