Valuation multiples, such as a price earnings ratio or EV/EBITDA, can be based on either historical, current or forward prices. All three approaches individually provide valuable insights but combining them provides a bigger picture and facilitates further analysis.
A price-multiple chart shows historical, current and forward stock prices or enterprise values with an overlay of valuation multiples. The historical portion of the chart puts stock price changes in the context of historical profit forecasts and revisions. The forward portion provides further insights into current value and analyst target prices.Continue reading “Equity analysis using price-multiple charts”