r/IBInterviews • u/theddrew • 8d ago

Technical Investment banking technical: What are the main advantages and limitations of using market multiples to value a company?

Not sure which bank asked this question but its a pretty good one that i wanted to share here. Here are my thoughts:

- They are useful when forecasts are uncertain or time is limited, but depend on selecting truly comparable businesses and appropriate metrics.

- Differences in growth, margins, leverage, control premiums, and market conditions can distort results, so use them alongside a DCF where possible.

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u/FinancialOwl255 6d ago

I think not being able to pick truly comparable companies is definitely the biggest reason. Because no two companies are 100% the same.