Learnings · Valuation
Multiples:
P/E, P/B, EV/EBITDA
A multiple prices a company off what the market pays for similar ones. Which one to use, why the top and bottom must match, and what they read today for the Nifty 50 and listed companies.
The question
How would you value a company on multiples, and which multiple would you choose?
The answer in sixty seconds
Find companies the market already prices that are like yours, take their multiple, and apply it to your company’s earnings, book value or EBITDA. The top and bottom must match: equity value goes with figures that belong to shareholders, net profit for P/E and book value for P/B; enterprise value goes with figures before interest, EBITDA and sales.
Choose by the business. EV/EBITDA suits capital-heavy companies with different amounts of debt, such as cement and telecom. P/E suits steady earners. P/B suits banks and lenders, whose assets are carried close to their value. Then say why yours deserves a premium or a discount to its peers: faster growth, higher returns on capital, or less risk.
P/E = market cap ÷ net profit (or price ÷ earnings per share) P/B = market cap ÷ shareholders’ equity EV/EBITDA = enterprise value ÷ EBITDA Earnings yield = 1 ÷ P/E
Worked on live numbers
The index and the companies
| Nifty 50 price to earnings | 19.05× |
| Price to book | 2.78× |
| Dividend yield | 1.52% |
| Earnings yield (1 ÷ P/E) | 5.25% |
| India 10-year yield | 7.47% |
| Earnings yield less bond yield | −2.22 pts |
Nifty 50 figures from NSE's index snapshot of 23 Oct 2026; the 10-year yield is CCIL's, 23 Oct 2026.
Setting the earnings yield against the bond yield is a quick reading of how much extra the market offers for owning shares. Treat it with care: earnings grow with inflation and a bond’s coupon does not, so the gap understates what shares are expected to return. Interviewers like candidates who know the flaw.
| Multiple | Tata Consultancy Services | UltraTech Cement | Bharti Airtel |
|---|---|---|---|
| Price to earnings | 18.6× | 39.8× | 44.2× |
| Price to book | 8.5× | 4.2× | 7.9× |
| EV / EBITDA | 12.3× | 20.0× | 11.9× |
| EV / sales | 3.32× | 3.98× | 6.51× |
| Earnings yield | 5.4% | 2.5% | 2.3% |
Statements: consolidated, for the year to 31 Mar 2026, as Yahoo Finance carries them, in Rs crore. Prices and market caps: NSE closes of 23 Oct 2026 via Yahoo Finance. Balance-sheet figures are at the year end while the market cap is today's, the usual mismatch in any quick EV.
These are on the last full year’s figures (trailing), so they differ from sites that use the last four quarters or next year’s forecast. EV is from the bridge on the EV page.
Follow-ups
What they ask next
Two companies in the same sector trade at P/Es of 15 and 40. Why might that be fair?
The dearer one may grow faster, earn more on its capital, carry less risk or have less debt, or its earnings may be temporarily low. A P/E is price over one year’s profit, so anything that makes later profits bigger or safer lifts it.
What is the P/E of a loss-making company?
It has no meaningful P/E. Use EV/sales or EV/EBITDA if EBITDA is positive, or a forward P/E on expected profit.
What does a 1-for-2 stock split do to the P/E?
Nothing. The price halves and so does earnings per share.
Why is EV/EBITDA used to compare companies with different debt?
It is before interest, so it does not depend on how the company is funded, and before depreciation, so it is less affected by different asset ages and accounting choices.
Is the Indian market expensive?
Compare today’s P/E with the index’s own history, set the earnings yield against the 10-year yield, and look at how fast earnings are growing. Then take a side and defend it; the interviewer wants a view and the reasons for it, not a number.
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