§ 01
MSFT — P/E, EV/EBITDA, P/B, Revenue Growth. Open MSFT on the Ledge to see current values.
§ 02
| Multiple | Numerator | Best For | Weakness |
|---|---|---|---|
| EV/EBITDA | Enterprise Value | Most industries — neutralizes capital structure | Ignores capex differences |
| P/E | Market Cap (Price) | Profitable, stable companies | Distorted by leverage, taxes, one-time items |
| EV/Revenue | Enterprise Value | High-growth or unprofitable companies | Ignores profitability entirely |
| P/FCF | Market Cap (Price) | Capital-light businesses | Volatile for capex-heavy companies |
| EV/EBIT | Enterprise Value | Capital-intensive industries | Affected by depreciation policies |
§ 03
EV-based multiples (EV/EBITDA, EV/Revenue) are generally superior to price-based multiples (P/E) because they account for differences in capital structure. A company can look cheap on P/E simply because it’s loaded with debt.
§ 04
Look up a company in **Fundamentals** and calculate its EV/EBITDA, P/E, and EV/Revenue. Then compare to 2–3 peers. Which multiple shows the most consistency across the peer group?
§ 05
A company trades at 8x EV/EBITDA (cheap vs. 12x peer median) but 25x P/E (expensive vs. 18x peers). What explains the divergence?
§ 06
§ 07
You're comparing 5 tech companies. Valuation multiples: EV/EBITDA 12-18x, EV/Revenue 4-9x, P/E 20-35x. Which is the RIGHT multiple to use?
Five questions · AI feedback
Sit with the ideas.
A peer group has median EV/EBITDA of 14x. Your target company has EBITDA of $500M but grows at 20% vs. peers at 10%. What EV range is reasonable?
Why: