A stock multiple is, at its most basic level, the measure of “value” in the market. In its purest form, a multiple reflects the relationship between a stock price and its earnings. In traditional investment models, a company’s potential to earn a return on capital was the immediate performance driver in evaluation. The problem with simple price stock multiples is they don’t reveal important truths about a business operation, a UBS Global Research report on valuations and accounting points out. For its part, UBS has a desire to create a new multiple formula that addresses the nuance in how a company operates underneath the hood.
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Why do similar stocks have different...
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