Originally just a valuation solidity check, multiples have become a popular approach to value young, fast growing companies. Equidam integrates this approach to estimate the exit value in the VC method and the terminal value in the DCF with multiple, avoiding the inconsistencies of more simplistic applications.

What is a multiple and how is it used

A multiple is the ratio between the valuation and an accounting result (revenues, EBITDA, EBIT, etc.) of a company. It is usually considered by industry. Practitioners use the product of an industry multiple and a company’s reported accounting result as a proxy of that company’s valuation.

The simplicity of this approach leads many practitioners to apply it acritically to compute valuations. In fact this might generate biased results failing to represent the fair value of a company.

EBITDA multiple on the last projected year

Revenues vs EBITDA multiple

Apart from some industry-specific exceptions (e.g. banking, real estate), the most reliable multiples are based on EBITDA. As it also takes into account the main expenses due to core operations, it is the main accounting proxy to cash flow generation.  As cash is the ultimate value driver, EBITDA is  to be preferred to revenues.

Current year vs last projected year

In order to overcome the limits of being an average it is important to apply the multiple to the last projected year EBITDA and then discount it to the present value. This allows to take into account the company specific growth (EBITDA growth) and risk (discount rate). 

Equidam follows these guidelines in order to use the whole informational power of the multiple and avoid biases.


The source of Equidam’s industry multiple is the online dataset of public companies worldwide curated with annual updates by Prof. Aswath Damodaran of New York University.

The list of EBITDA multiples by industry applied by Equidam is reported here.

Did this answer your question?