Can Simple Metrics Trump Complex Valuation Approaches? The Truth About Multiples ...

One of the most hotly debated topics in the investing world is whether relying on valuation multiples—such as P/E (Price-to-Earnings), EV/EBIT, or P/FCF—is truly “proper” valuation work.

Can a single multiple (or even several) tell you everything you need to know about a company’s value, or do you need more rigorous methods like discounted cash flow (DCF) analysis to make sound investment decisions?

In conversations with my friend Tiho Brkan, he argues that using any single multiple as your primary gauge is simply wrong and leads to subpar results.

He says, “Shorthand or not, it’s the wrong way to go about it. Most people using multiples don’t even know what they mean. As Oscar Wilde famously said, ‘People know the price of everything and the value of nothing.’”