Financial Analysis
Valuation Multiple
A number multiplied by a business's earnings figure, typically SDE or EBITDA, to produce an estimated purchase price. Reflects perceived risk, growth potential, and business quality.
A number applied to a normalized earnings figure, most commonly SDE or EBITDA, to derive a business's indicated value or purchase price. The multiple compresses buyer and seller expectations about risk, growth potential, revenue quality, and market conditions into a single coefficient. Multiples vary by industry, business size, and deal conditions. Industry-specific benchmarks are published by transaction databases and broker associations. A higher multiple reflects lower perceived risk or stronger growth characteristics; a lower multiple reflects the opposite.