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Examples of forward priced multiple calculations

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Multiples used to describe the current valuation of a stock or business are generally based on a current price
priced multiples can be difficult to interpret and use if the current or first-year forecast level of profitability is
of expected longer-term performance. Using foreacasts further out helps, but comparing current price to say
forcast profit produces its own challenges.

We advocate greater use of forward priced multiples. They are more comparable and relevant for relative va
comparisons and provide a better basis for terminal values in DCF analysis. The examples below illustrate ho
multiples can be calculated. Select 'about this model' above for more about forward priced multiples and the

This is an interactive model: All blue cells can be modified

Single company over time

Current price or enterprise value
Cost of equity or WACC

Profit and cash flow forecasts 1 2

Profit metric 10.0 15.0
Dividends or free cash flow 1.0 1.2

Current priced multiples 30.0 20.0

Current and forward prices 300.0 332.0

Forward priced multiples 30.0 22.1

Comparison of 2 companies - using simplified cash flow yield

Company 1
Current price or enterprise value 155.0
Cost of capital 10.0%
Average forecast dividend or FCF yield 1.0%
Profit metric - year 1 8.0
Year for forward priced multiple
Profit metric - year 5 22.0

Current priced year 1 multiples 19.4x

Current priced year 5 multiples 7.0x

Forward price 218.8

Forward priced year 5 multiples 9.9x

This model is for general information and education purposes only - see terms of use and disclsimer

© The Footnotes Analyst, 2024

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tiple calculations

generally based on a current price. However, current

ear forecast level of profitability is not representative
but comparing current price to say the 5th year

arable and relevant for relative valuation

The examples below illustrate how forward priced
t forward priced multiples and these examples.

can be modified

300.0
11%

3 4 5
20.0 22.0 23.0
1.5 2.0 3.0

15.0 13.6 13.0

367.3 406.2 448.9

18.4 18.5 19.5

yield
Company 1 Company 2
 155.0 2,000.0
10.0% 7.5%
1.0% 5.0%
8.0 200.0
5
22.0 220.0

19.4x 10.0x

7.0x 9.1x

218.8 2,207.6

9.9x 10.0x

only - see terms of use and disclsimer

Terms of use and disclaimer