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Relative Valuation🟢 Beginner

Why Do Some Businesses Sell for Much More Than Others?

What Every Multiple Is Really Measuring

Every multiple (PE, P/B, EV/EBITDA) is just a shorthand for a DCF. Understanding the link reveals why multiples differ across firms and what actually drives them.

PE RatioPB RatioEV/EBITDARevenue MultipleMultiples

Live Result

$15.015015

ƒ: price / epsraw: 15.0150

ƒ(x)

Use variable names from the panel above (e.g. FV, r, n) — or type numbers directly: 10000 / (1 + 0.08)^10

price$

Stock price per share

price = 50

eps$

Earnings Per Share (annual)

eps = 3.33

bv_share$

Book value per share

bv_share = 20

ebitda

EBITDA (for EV multiples)

ebitda = 100

ev$

Enterprise Value = market cap + debt − cash

ev = 900

revenue$

Annual revenue

revenue = 500

💡 You can also enter values directly in the formula: 10000 / (1 + 0.08)^10

⬇ Export Calculation

Exports a plain .txt file with your expression, formula, all variable values, result, and educational notes — ready to paste into any report, Word doc, Notion, or Google Docs.

The exported file includes the formula in standard mathematical notation — you can paste it directly into Excel, Google Sheets, or back into FinanceSheep.

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Learn: What Every Multiple Is Really Measuring

Relative Valuation · Educational Guide

The Core Idea

Why do Amazon and GM trade at completely different PE ratios? Why does a tech startup command 15× revenue while a grocery chain gets 0.3×? Every multiple reflects a story about growth, risk, and returns. Once you understand that, multiples make sense.

How It Works

Every multiple is a compressed DCF. PE = 1 / (ke − g) for a stable-growth firm. EV/EBITDA reflects capital structure, tax, growth, and risk. Higher growth and lower risk → higher multiples. Lower growth and higher risk → lower multiples. Comparing multiples only makes sense between firms with similar growth and risk.

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Real-World Example: Two firms both have PE of 20×. Firm A grows 3%/year. Firm B grows 20%/year. Firm A is expensive; Firm B is a bargain — the same multiple buys very different future earnings streams. This is the PEG ratio insight: PE / growth rate adjusts for different growth expectations.

Why Do Some Businesses Sell for Much More Than Others?

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