Price-to-Earnings Ratio (P/E)

A valuation ratio comparing a company's market capitalisation to its book value. A P/B ratio significantly above 1.0 indicates that the market recognises substantial value beyond what is recorded on the balance sheet, typically reflecting intangible assets.

A financial leverage ratio calculated by dividing total debt by total shareholders' equity, indicating the relative proportion of debt and equity financing in a company's capital structure. A higher ratio indicates greater financial leverage and potentially higher financial risk, while a lower ratio suggests more conservative financing.

The ratio of a loan amount to the appraised value of the underlying collateral, expressed as a percentage. LTV is a primary risk metric used by lenders to assess the adequacy of collateral coverage — a lower LTV indicates greater equity cushion and lower credit risk.

A ratio used to estimate the value of a company by comparing its market value or enterprise value to a financial metric such as revenue, EBITDA, or earnings. Higher multiples typically reflect stronger growth prospects, margin quality, and intangible asset positions.

A contractual provision in an acquisition where a portion of the purchase price is contingent on the acquired company achieving specified performance targets post-completion. Earnouts bridge valuation gaps between buyer and seller expectations.

A valuation ratio comparing a company's enterprise value to its EBITDA. EV/EBITDA is one of the most commonly used multiples for comparing valuations across companies, controlling for differences in capital structure, taxation, and depreciation policies.

A valuation ratio comparing a company's enterprise value to its annual revenue. EV/Revenue is often used to value high-growth or pre-profit companies where earnings-based multiples are not meaningful.

A contractual feature that gives an investor the right to share in additional value creation beyond a base return, commonly found in preferred equity and mezzanine instruments. Upside participation structures are designed to reward investors for the risk associated with backing intangible-driven growth, aligning their interests with the company's long-term value creation.

The AI Valuation Premium: How AI Capability Affects Company Value

AI-enabled companies trade at 25-40% higher multiples than peers, but not all AI capability is created equal. This article examines what drives the AI valuation premium, how to assess whether it is justified, and what happens when the premium unravels.

How do intangible assets affect company valuation multiples?

Companies with strong intangible assets command higher EV/Revenue and EV/EBITDA multiples because intangibles drive sustainable margins, competitive moats, and scalable growth.

How do intangible assets interact with valuation multiples?

Companies with strong intangible assets (brands, IP, data moats) tend to command higher valuation multiples than commodity businesses, because buyers pay more for durable, defensible earnings.

What is a multiple (EV/Revenue, EV/EBITDA) and how do I choose the right one?

Multiples are shortcuts: Enterprise Value / Revenue (EV/Revenue) for growth-stage, EV/EBITDA for profitable companies, EV/Users for early-stage. Choose based on whether your business is profitable.