By
Borsgade
As part of his work for Counterpoint Global, Michael Mauboussin recently publisted an article discussing the use and misuse of multiples in valuation and investing. He covers what multiples miss, why they differ and their link to business fundamentals.
Michael finds that most analysts ‘price’ stocks based on their multiples: “Researchers collected responses from nearly 2,000 analysts who were members of the CFA Institute, a global association of investment professionals. Asked about their approach to valuation, nearly 93 percent selected “a market multiples approach.”
We do not discourage the use of multiples. Rather, we encourage those who apply multiples to understand the underlying value drivers that substantiate their choices. The goal is to keep valuation in mind when pricing businesses
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