KPMG Multiples

Sales multiples put the total company value, consisting of market capitalization and net debt, in relation to a company's sales. The multiple is thus used to derive the company's total value (value for all investors, i.e. shareholders and creditors), as a company's sales are included in a cash flow that is used for both dividends and interest payments. Sales multiples have limited informational value since they do not account for operating profitability. Particularly in the case of a valuation using sales multiples, it can be observed that the multiple tends to be inflated for peer group companies with higher profit margins than the valuation object, as the peer group companies that achieve higher margins generally show higher valuations. Sales multiples therefore regularly correlate positively with operating profit margins. In KPMG Multiples, this correlation is captured in an individual and peer-group-specific regression analysis and transferred to the target company. This results in a profitability-adjusted, target company-specific sales multiple.

EBITDA multiples put the total company value, consisting of market capitalization and net debt, in relation to earnings before interest, taxes, depreciation and amortization (EBITDA). This multiple is also used to derive the total enterprise value (value for all investors, i.e. shareholders and creditors). Since EBITDA is unaffected by interest income and expenses, it represents a cash flow available to all investors. Moreover, EBITDA is independent of a company's capital structure and its depreciation and amortization methods, and therefore the multiple is often preferred in practice for comparisons. For an indicative valuation based on multiples, KPMG Multiples has key figures and multiples of listed companies from over 74 sectors. The tool also offers additional benchmark data from over 20,000 transactions for each multiple.

EBIT multiples put the total company value, consisting of market capitalization and net debt, in relation to earnings before interest and taxes (EBIT). The multiple is used to derive the total company value (value for all investors, i.e. shareholders and creditors), as the operating profit is not influenced by interest expenses and interest income and therefore flows into a cash flow that can be distributed to all investors. If depreciation and amortization and capital expenditure are aligned, i.e. the amount of capital expenditure does not deviate significantly from planned depreciation and amortization, and working capital fluctuates only slightly, EBIT can best be regarded as a proxy for operating cash flow. KPMG Multiples provides EBIT multiples for listed companies from over 74 sectors for an indicative company valuation. The tool also offers benchmark multiples from over 20,000 transactions.

Earnings multiples put the market value of equity, i.e. market capitalization, in relation to a company's net income for the year. In contrast to EBITDA and EBIT multiples, earnings multiples are used to derive the value of equity directly, as net income is already adjusted for interest expenses and interest income and flows into a cash flow that is therefore only distributed to shareholders. It should be noted that earnings multiples only provide reliable results if the peer companies have a similar capital structure to the valuation object, as earnings multiples are influenced by a company's debt. In KPMG Multiples, this relationship is captured in an individual and peer-group-specific regression analysis and transferred to the target company. This results in a capital structure-adjusted, target company-specific earnings multiple. For earnings multiples and many other multiples, benchmark data from over 17,500 listed companies is available in our online tool KPMG Multiples. In addition to standard trading multiples, transaction multiples from over 20,000 transactions are also provided.

The book-to-market ratio describes the ratio of the market value to the book value of a company's equity. The multiple is calculated by dividing the market value of a company's equity by its book value of equity. The multiple of the book value to the market value of equity is often used to value companies in capital-intensive sectors (e.g. banks or industrial groups), as it provides an insight into the relationship between net asset value and market value. In KPMG Multiples, multiples are provided at certain valuation dates based on actual data (book value of equity based on the annual report) and forecasts (average estimates of the book value of equity by analysts) for the corresponding financial years.