Multiple-based Valuation

Multiple-based valuation is a method used to estimate a company's value by comparing it to similar businesses. It involves calculating a financial metric, like revenue or profit, and then multiplying it by a relevant "multiple" derived from comparable companies’ valuation ratios. For example, if similar companies are valued at 10 times their earnings, and the target company earns $1 million, its estimated value would be $10 million. This approach provides a quick, market-based estimate and is commonly used because it reflects current industry trends and investor sentiment.