7 Financial Ratios Beyond EBITDA Multiples in Acquisition Valuations
When it comes to acquisition valuations , relying solely on EBITDA multiples often provides an incomplete picture. While EBITDA captures a company's operational performance, it overlooks key aspects like financial stability, liquidity, and long-term profitability. To gain a more accurate and holistic understanding of a business’s value, incorporating additional financial ratios is essential. Below, I’ll outline seven critical ratios that go beyond EBITDA multiples , explaining their relevance and how they contribute to more precise valuations. 1. Price-to-Earnings (P/E) Ratio The Price-to-Earnings (P/E) ratio is one of the most widely recognized valuation metrics. It compares a company’s market price per share to its earnings per share (EPS). This ratio offers insight into how much investors are willing to pay for each dollar of earnings, making it a useful tool for assessing market sentiment and growth expectations. A high P/E ratio often indicates that the market expects strong ...