The Right Role for Multiples in Valuation

McKinsey on Finance, No. 15, pp. 7-11, Spring 2005

5 Pages Posted: 28 Sep 2005

See all articles by Tim Koller

Tim Koller

McKinsey & Co. Inc.

Marc Goedhart

McKinsey & Co. Inc.

David Wessels

University of Pennsylvania - Finance Department; Emory University - Goizueta Business School

Abstract

Discounted cash flow valuations are the best way to assess the value of projects, but they are only as accurate as the forecasts behind them. A careful review of a company's multiples - and those of its competitors - can help verify those underlying forecasts. However, executives must be critical consumers of published multiples and probe unexpected differences.

Keywords: Valuation, Multiples, Comparables

JEL Classification: G30, G34

Suggested Citation

Koller, Tim and Goedhart, Marc and Wessels, David, The Right Role for Multiples in Valuation. McKinsey on Finance, No. 15, pp. 7-11, Spring 2005, Available at SSRN: https://ssrn.com/abstract=805166

Tim Koller

McKinsey & Co. Inc. ( email )

55 East 52nd Street
21st Floor
New York, NY 10022
United States

Marc Goedhart

McKinsey & Co. Inc. ( email )

Konigsallee 60C
K-40027 Dusseldorf, Quebec
Germany

David Wessels (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-573-9313 (Phone)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
404-727-9091 (Phone)

HOME PAGE: http://goizueta.emory.edu/faculty/faculty_bios_temp.asp?bio_id=1535

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