Quick Technical Question 2
Sup guys. quick question. Know this is an easy concept but just want to understand it a bit better. Why would it be good for a firm to have high multiples (high EV/EBITDA, EV/EBIT, etc.) compared to their peers? Would it attract a high value when people might potentially acquire them? How might it help them acquire others? Also, would low multiples help companies in any way, aside from saying that they are undervalued and that paying a low amount might be a big benefit?
high multiples = higher expectations for growth. investors believe that the company is going to grow at a faster rate than the peer group (as long you have a good set of comps). it’s better for acquisitions because the cost of stock is lower.
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