There are a range of common enterprise and equity multiples. The common one to start off with is your EV EBIT for your enterprise multiple, and your PE ratio for your equity multiple. An alternative enterprise multiple is EV over EBITDA earnings before interest tax depreciation and amortization. When might it be useful to look at your earnings before depreciation and amortization? Well, imagine we're looking at two very similar companies. Let's imagine that Apple and Microsoft are very similar. They've got very similar operations, very similar factories, similar sales, very similar cost structures. However, their profits are wildly different because of a different depreciation and amortization policy. One depreciates everything over two years. The other depreciates everything over 10 years. This is going to give us a stark difference in EBIT, but if we look at EBITDA, earnings before depreciation and amortization will have a much better comparison of those two companies. Another enterprise multiple we could look at is EV divided by revenues.

Now, this can be particularly useful when you're looking at industry contexts where value is driven by sales, such as in the retail industry. Alternatively, also useful when you're looking at companies that are loss makers, I want to compare it to other companies. Maybe these are startups in a new industry and no one is making a profit yet. Instead, we could use EV over revenues. An alternative equity value we could use is price divided by book value. Where is this useful? Well, really useful when a company's value is driven by its balance sheet value. Very common in commodity businesses, so maybe copper, maybe gold, maybe oil and gas driven businesses where the value of their balance sheet, the assets that they hold, drives the value of the business.