WWD LIST: Double-digit Multiples
The world’s more polarized than ever — and it’s not just politics. Wall Street is also going for the extremes. It’s not a surprise companies and brands that are ultra chic, ultra inexpensive or ultra sporty are getting all the love from investors and scoring the highest valuations. Luxury names have always commanded stronger multiples given their sky-high margins. But the high-end is now being valued side by side with the discount pricing crowd and the brands leading the active charge as investors continue their migration away from the middle. When investment bankers put price tags on companies, they look at enterprise value, which includes the value of all the company’s outstanding shares and debts, and earnings before interest, taxes, depreciation and amortization, or EBITDA. It’s a big-picture measure that incorporates all of the money a company has taken from investors and all the cash that flows through the business. There are plenty of nuances. A drop in EBITDA can suddenly boost a valuation if investors are understanding and companies typically need to be compared with others in a similar line of business. But an enterprise value of 10-times EBITDA or higher has generally been seen as a solid valuation. A WWD study of valuationsFollow WWD on Twitter or become a fan on Facebook.
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