How to value a company using multiples - MoneyWeek Investment Tutorials

For investors wanting to do a quick and dirty check on whether a firm is cheap or expensive, multiples can be helpful. As part of his short series on valuing companies, Tim Bennett explains why and how to go about using them.

[@rossthegreatess]

Anyone on here in college, thinking.... I'm learning all of this for free. Thank Tim again!

[@NickVanzwol]

College is practice for application of concepts. Knowledge is one thing but having confidence you know what to do with it is a whole other beast.

[@rickvian]

well, i'm not sure graduating from youtube channel is requirement for job . College degree still used as requirement today

[@daltonroberts8165]

Someone in college who spent all their money on weed and now am here

[@nickmhc]

This is way better imo. Teaching you to use concepts in markets.

[@rent2ownnz]

Hey Tim, Just wanted to say thank you! I know this is an old video, however I think this is well articulated and interesting enough to stick with it. I Prefer to do DCF Intrinsic valuations, however this is impossible to do with a new company that is in its growth phase and pouring all its earnings + more into growth, development, sales marketing and more. Using P/E Sector Comps with PEG and Price to Sales Ratios is a good way to at least see what the rest of the sector is getting paid on a share price basis and you will see if this comparable to the company you are researching. I always look at this and the asset base net growth year on year to see if the company is heading In the right direction or simply burning cash hidden inside a sales Trojan Horse!! Thanks again for your time to make these videos.

[@jimb2753]

would be nice if tim actually showed his work using the financials of an actual company to do these tutorials. thats practical teaching! Application then becomes easier

[@jamesriddle8029]

Using multiples is a great starting point for determining the timing of the sale. If the approximate selling price is within the seller's acceptable amount, it's time to start the process. Sellers can get maximum profits for the sale of their business if they create a competitive environment when buyers compete against each other for the purchase. The value of the business is ultimately determined by the amount a willing and informed buyer will pay for the business. Creating a competitive environment, causes the buyers to reach deeper into their pockets for fear of loss. The seller will get better terms as well in a competitive environment.

[@TheMunishk]

Were you always good? It's joy to watch your videos specially when you explain in clear and simple manner.

[@GurlNextDoor150]

The nose picking at 6:24 tells me I can trust this man, he has nothing to hide.

[@atirekverma808]

I clicked like with my finger with nosie on tip..🗽

[@JavierBonillaC]

Common man, anyone could do that. That’s a cheap shot.

[@jasondavis7475]

can I ask if you have any other video that expands more on when to choose the right multiple?

[@Economy872]

Absolutely fantastic ! I watch 5 of your lessons in a row !!!

[@preetichaudhary5777]

Great video Tim. I didn't get the comparison in the end. I will appreciate if you could explain that comparison of 500 Million with 300 Million.

[@Tyson007ian]

according to the evaluating method, the company is worth 500m (you got that part) but it is currently valued at 300m, so therefore it could be 200m undervalued, meaning it may be a bargain and a buy

[@valueStocks]

*Great topic to cover!*

[@pat53787]

Sir can you please explain this when you said let's say if the value of the company is 300M. How we would know that because you back-calculated the price from PE? pardon me if I am wrong. Thanks

[@Commando303X]

This is a somewhat convoluted way of saying simply to compare P/E ratios between a company and its sector.

[@ranjitmenon1175]

QUEST :Earning based ratio company's, the sales has to be minus with Expenditures to get the actual valuation of the company or its done directly based on sales turnover ? I request you to answer this question please... R. B. M

[@karanbajaj852]

does these formulas are used for forecasting ? and valuing future sales or earning ? please share your thoughts

[@celtichongy]

Useful guide indeed.

[@daniellobe1351]

Hi, Please what are suitable techniques for the valuation of banks? Thanks

[@jorgesa4244]

Hello, can't we use growth in this method?

[@davidm372]

should the pound sign have a double dash?

[@fatemeazizi1863]

Why do businesses use the Multiples Method?

[@ExcelTutorials1]

Thank you for the super helpful video!!!!!!!

[@andypaul6166]

I'm confused. Towards the end he says that once you get a comparable PE multiple i.e. 5 you can 'value' unlisted companies. But then he compares the £500m with the same firm's (which is unlisted) market cap of £300m. How do you get the Market Cap if its an unlisted company? Anyone care to help?

[@rahulcart]

It is not unlisted. That is why he is comparing 500m (his calculated value) with 300m (the current market capitalisation) and commenting that at 300m it is cheaper to invest in.

[@hayhay_to333]

Very informative.

[@Arv995]

thank you for this video.

[@madhavsharma7222]

But p\e ratio is used to determine the valuation i.e whether it is overvalued or undervalued. Then how will it be used to determine the cost of a business while selling it and how come earning per shares multiplied would give the cost of business?

[@gauravbhayana4626]

yeah let me know if you get to know about that

[@madhavsharma7222]

@@gauravbhayana4626 pardon???

[@gauravbhayana4626]

@@madhavsharma7222 that how to calculate cost of business and not whether its over or under value

[@tonimuscat7630]

I would like to learn help please. thanks t muscat how to do a reverse discount cash flow, can you

[@siddsy100]

Wow. Fantastic video. Beautifully explained...w hen to use P/E, when to use P/S and when to use P/B. Most places I've read vague explanations like...compare P/E to peers, or compare to benchmark. First time I've actually seen an explanation on how to use it to value against Market Cap. Many thanks!

[@philrodgers2167]

Tim loves it quick and dirty 🤣🙌🏼

[@ayoowodunni]

Does E in this (earnings) mean revenue or net income?

[@georgyishak8760]

Net Income , because this is the cash that is attributable to equity holders hence (dividends) and it is derived from net income.

[@itumblers]

Great video!

[@jackhill888]

My god, how many times can you say quick and dirty in the same video

[@Snowy123]

Do you plan explaining DuPont?

[@Anonymous-lw3nb]

Ur videos r crisp but it will be more helpful if you could provide little more depth to the process of valuation

[@noobleagueplayer4110]

Hi Tim, just wondering why do we have to use a benchmark number for the P/E ratio? Why not use the company's actual P/E ratio?

[@RajnishKumar-el6hh]

Thanks

[@YazidSG]

Is the price used is the market cap price?

[@jarrodreagle1937]

Market Cap = Current Share Price ($) x Outstanding Share. Here's a more in depth definition. www.investopedia.com/terms/m/marketcapitalization.asp

[@CopycatStudiosLA]

But... he always just pull the multiples out of a hat randomly? like 10... 5... -- how d you get those numbers in the first p;ace?

[@joshuabaldwin2892]

those multiples usually come from industry comparisons.

[@CopycatStudiosLA]

sorry I am new to this - where can I find these data?

[@joshuabaldwin2892]

A primary source for finding peer companies is in company filings (10Ks, 10Qs, Prospectuses) in the “Competitors” section. These filings can be found at the SEC website (www.sec.gov/). Sell-side research reports are an excellent source of comparable companies. Usually, an initiation report or a lengthy industry report will have a fairly complete list of peer companies. This provides a good point of reference for what other Wall Street analysts believe to be the target company’s relevant peer universe.

[@CopycatStudiosLA]

wow many thx! I ll look into it.

[@AleksandreMzhavia]

Great

[@farazchaudhry8085]

good job(Y)

[@tieronemanagement2273]

I don't mean to be rude but you should really cut half of whatever you want to say in half

[@zenzeleluckymtshali8433]

hi good morning

[@ruidasthompson9127]

investing in crypto is lucrative and a big chance to make money online.

[@osamahriyadh3214]

why you are talking so fast . come down man . talk slow so we can understand you beacuse like that i cant understand anything

[@matteo7816]

The teacher is great. Maybe you should learn English instead

[@angel0smile]

Your conclusion is totally wrong

[@cacerespablo]

Bad video. Too much talking

[@manishparmar9455]

Can put in subtitle in your videos??

[@patrickjohnson8516]

Thank you for sharing this information. I like your delivery. You make it easy to understand.

[@tinnguyen2219]

Thank you so much for sharing this useful data! Greatly appreciated.

[@MrMikeypuff]

you're my favorite :)

[@qualitymm]

u look like eric bana.