Valuation multiples are stock ratios that include in the calculation share price and show whether stock is cheap or expensive compared to similar stocks.
Valuation multiples (or just multiples) are used in relative valuation (one of the methods for stock valuation), which is very popular among private investors and professionals. Multiples represent fundamental analysis and may show if the stock is undervalued or overvalued.
There is very close connection between multiples and DCF (discounted cash flow) valuation, and if the person is experienced, he may guess the target price by multiples quiet precisely.
Main Multiples Used in Practice for Stock Analysis
P/S ratio (not recommended)
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