Lesson 5 of 10 · All lessons in this module
- Price multiples and the method of comparablesVideo lesson
- The relative valuation process
- Justified multiples: forecasted fundamentals, PEG and regression
- P/E in depth: earnings yield, PVGO and normalized earnings
- Sales, dividend, cash flow and industry-specific multiples
- Enterprise value multiples, asset-based valuation and choosing a modelVideo lesson
- EV/EBITDA drivers and value-to-book multiples
- Choosing a peer group: industry and factor approaches
- Current, past and forward multiples, and terminal values
- Integrated cases: why multiples differ, the justified P/E and comparables
This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.
Lesson 5 of 10 · 14 min
Sales, dividend, cash flow and industry-specific multiples
Beyond the P/E, analysts use sales, dividend and cash flow multiples, each with its own justified value from the constant growth model, plus industry-specific measures; each suits some companies and misleads for others.
In short
- Justified P/S = net profit margin × payout × (1 + g) / ( − g) = margin × justified trailing P/E.
- P/S is stable, usually positive and hard to manipulate, so it suits mature, cyclical and loss-making firms; but price is an equity claim and sales serve all capital providers, so use EV/Sales for leveraged firms.
- Dividend yield: trailing (annualized latest dividend), leading . Justified trailing yield = ( − g)/(1 + g); leading = − g.
- Justified P/FCFE = 1/( − g); V/FCFF = 1/(WACC − g). Cash flow multiples are harder to manipulate but swing with capex, working capital and (for FCFE) borrowing.
- Industry-specific multiples (EV per barrel of reserves, per subscriber…) track sector value drivers but cannot be compared across industries.
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