Reading 61: Introduction to Price Multiple

Prescribed reading:

John D. Stowe, Thomas R. Robinson, Jerald E. Pinto, and Dennis W. McLeavey (AIMR, 2003)

LOS

The candidate should be able to:
a. discuss the rationales for, and the possible drawbacks to, the use of price to
earnings (P/E), price to book value (P/BV), price to sales (P/S), and price to cash
flow (P/CF) in equity valuation;

b. calculate and interpret P/E, P/BV, P/S, and P/CF.