Fundamental Glossary / Valuation Methods
Exit Multiple
A valuation multiple applied to a metric at the end of the forecast to estimate terminal value.
Formula
Terminal value = year-n EBITDA x chosen EV/EBITDA, or year-n earnings x a P/E, or a similar pair. Discount that value back to today.
What it means
An exit multiple assumes that at the end of the forecast the business will be priced the way comparable businesses are priced today, or the way you think they will be priced then.
It is an alternative to perpetual growth. The two should be checked against each other. A multiple implies a growth rate, and a growth rate implies a multiple.
How to read it
Use a mid-cycle multiple on a mid-cycle year. Applying a peak multiple to a peak earnings year double-counts the good times.
What to watch
The multiple has to match the metric. An equity P/E on EBITDA, or an enterprise multiple on a figure that is after interest, mixes claims. Also subtract net debt at the end, not today, if you used an enterprise multiple.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.