Other Valuation Multiples
P/E isn't the only way to size up price against fundamentals — P/S, P/B, and EV/EBITDA fill in cases where P/E breaks down.
P/E stops being useful the moment a company has no earnings yet (many young, fast-growing businesses) or earnings distorted by a one-off charge. InsiderWolf's Key Stats show three alternative multiples for exactly this reason — each swaps out "earnings" in the denominator for something less easily distorted.
| Multiple | Formula | Best used when |
|---|---|---|
| P/S (Price/Sales) | Price ÷ Revenue per Share | The company has little or no profit yet, but real revenue |
| P/B (Price/Book) | Price ÷ Book Value per Share (assets minus liabilities) | Asset-heavy businesses (banks, insurers, real estate) |
| EV/EBITDA | Enterprise Value ÷ EBITDA | Comparing companies with different debt loads or tax situations |
EV/EBITDA uses Enterprise Value instead of market cap in the numerator specifically because it adds back debt and subtracts cash — putting a heavily-indebted company and a debt-free one on a more comparable footing, which a plain price-based multiple can't do on its own.
Company A and Company B both have a $10B market cap and $1B of EBITDA. But A has $5B of debt and $1B of cash (Enterprise Value = 10 + 5 − 1 = $14B, EV/EBITDA = 14), while B is debt-free with $2B of cash (EV = 10 + 0 − 2 = $8B, EV/EBITDA = 8). Despite identical market caps and EBITDA, B is meaningfully cheaper once each company's actual capital structure is accounted for — a plain P/E or market-cap comparison would have missed that entirely.
- None of these replace P/E outright — they're better suited to specific situations where P/E is unreliable or unavailable.
- P/S is the most permissive of the three (works even with zero profit) and correspondingly the least precise — it says nothing about whether revenue ever converts to real profit.
- As with P/E, comparing these across industries with very different capital intensity or margin structures is misleading.