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Valuation using multiples
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Valuation using multiples
In economics, valuation using multiples is a process that consists of:
- identifying comparable assets (the peer group) and obtaining market values for these assets.
- converting these market values into standardized values relative to a key statistic, since the absolute prices cannot be compared. This process of standardizing creates valuation multiples.
- applying the valuation multiple to the key statistic of the asset being valued, controlling for any differences between asset and the peer group that might affect the multiple.
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