In the previous chapter, the P/E and other multiples are considered as signals generated by underlying explanatory factors (such as earnings growth). In this chapter, the P/E itself is viewed as the factor that explains or predicts future outcomes and can therefore be used to support, or trigger, significant decisions.
The chief applications of market multiples include
Guiding investment strategies
Valuing corporate transactions – acquisitions, divestitures, mergers, joint ventures, and private equity investments
Illuminating macro-trends in the market and potentially providing ...
