What is the multiple market?
Market multiple is another name for the price ratio to the return of investment. This ratio compares the current price of the shares of the company with the current profit per share. The basic calculation for market multiple is divided by the share divided by earnings per share. For example, a company whose current shares price is $ 22.00 USD (USD) and the current profit per share $ 1.40 has more $ 15.70. Multiple is often a predictor of the future movement of stock prices. Most companies release their profit on the share quarterly, making it the best time to get the necessary information. In some cases, the Company may provide information monthly or ending 12 months. The use of this information for multiple multiple calculations ensures that the investor has the most up -to -date information in comparing data on the company's shares. Create future forecasts for the company's shares. For example, in the previous example, the company's market multiple is 15.70 based on the current $ 1.40 USD per share. The company most often provides future ODHADy income next quarter per share. If the company expects revenues to reach $ 1.75 per share, the stock price should be equal to the market for several times expected profit per share. The new stock price should then be $ 27.48 at the end of next quarter.
Increase the price of the company's shares is usually where most investors earn money. By using a market multiple approach, investors can determine whether shares in their portfolios will increase or reduce the price in the next quarter. Investors can then buy or sell stocks to maximize expected profits calculated by multiple access. Another term for this approach Ktato shares analysis is known as access to earnings. The great advantage of this method comes from information readily available on many stocks traded through stock exchanges.
Although simple in its approach, the earnings method is not without its shortcomings. Among the mostMore closer problems include using accounting information to determine net income, which is how the company ultimately calculates profit per share. Public companies can try to manipulate their net income using aggressive or illegal accounting procedures. This can distort the company's profit to the share and lead investors to decide on false premises. Companies with high expenditures for non -development - such as depreciation or amortization - can also artificially reduce net income, so the company looks less profitable and reduced profit per share.