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If public companies are trading at price to earnings multiples of 10, 15 or higher, should my business be valued based on the same multiples?

April 26, 2017Business companies Earnings multiples price public trading

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If public companies are trading at price to earnings multiples of 10, 15 or higher, should my business be valued based on the same multiples?

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Privately held businesses are rarely worth as much as similar businesses that are traded on the stock exchange (see above). Several reasons for this include the size, depth in management, liquidity, ability to raise capital and possible lack of transparency of a private business. Reaching the appropriate multiple requires analysis of your business to properly understand how it correlates to a similar public business (if at all).