Exit Multiple
The multiple of EBITDA (or earnings, or cash flow) implied by a DCF's terminal value. Computed as terminal enterprise value divided by terminal EBITDA. The exit-multiple sanity check compares the implied multiple against peer trading multiples and the company's own historical multiple range. A DCF whose implied exit multiple is materially higher than what comparable businesses trade at is implicitly assuming a re-rating that has never happened -- a common signal the DCF assumptions are too aggressive.
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Related terms
Ambiguity Aversion · Anchored Assumption · Asset Beta · Bank ROE Spread · Banker Pitch Deck · Beta
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