Earnings Multiplier

Earnings Multiplier

The price of a security per share at a given time divided by its annual earnings per share, adjusted for current interest rates. Often the earnings used are trailing 12-month earnings, but some analysts use other forms. The earnings multiplier is a way to help determine a security's stock valuation, that is, the fair value of a stock in a perfect market. It is also a measure of expected, but not realized, growth. It is a variation on the price-earnings ratio.
References in periodicals archive ?
One of the methods he used, aside from the 'net-net strategy' that we discussed last week, was the earnings multiplier.
This is then added to 8.5 to derive an earnings multiplier of 24.9.
An earnings multiplier is based on the total amount of employee compensation paid by employers in the industry.
The method of valuation, used in this case and predominantly in acquisitions, is an earnings multiplier. This simple calculation of valuation is the product of a multiplier (in the case, Denshi used five and Javier used seven) and an annual earnings number (in the case, IDS 2008 Net Profit).
The valuation methodology used by Denshi and IDS in their negotiation is the earnings multiplier approach.
Thus, an earnings multiplier of "5 times earnings" produces the same value as applying a capitalization rate of 20%.
The estimated income of local musicians who play at Tunica casinos shown in column (1) was multiplied by the earnings multiplier in column (3), resulting in the estimated total impact on regional earnings in column (5).
The Guaranteed Earnings Multiplier is intended to offset tax on the annuity's death benefit.
He particularly disputed Soter's choice of an earnings multiplier, the annual income ascribed to Katzenberg's product and the overall similarity of the Silver Screen deal to Katzenberg's claim.
The direct-effect earnings multiplier indicates the ratio of total earnings generated by the change in final demand to the earnings directly generated.
The purchase of a financial insurance product may increase the volatility of earnings per share and decrease the earnings multiplier.
The Denshi acquisitions team, under Kenji's direction, applied the earnings multiplier approach to valuing IDS, using the IDS 2008 net profit of 33.7 million [euro] as the basis to which an earnings multiplier would be applied.