Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Idioms, Encyclopedia, Wikipedia.
A stock's multiple is its price-to-earnings ratio (P/E). It's figured by dividing the market price of the stock by the company's earnings.
The earnings could be the actual earnings for the past four quarters, called a trailing P/E. Or they might be the actual figures for the past two quarters plus an analyst's projection for the next two, called a forward P/E.
Investors use the multiple as a way to assess whether the price they are paying for the stock is justified by its earnings potential. The higher the multiple they are willing to accept, the higher their expectations for the stock.
However, some investors reject stocks with higher multiples, since it may be impossible for the stock to meet the market's expectations.