Series 79 practice questionmediumEV/EBITDA Multiple
A company has an EV/EBITDA multiple significantly higher than its industry average. Which of the following is the most likely explanation?
- AThe company has higher future growth prospects than peers✓ Correct answer
- BThe company’s EBITDA is understated due to accounting errors
- CThe company has excessive leverage
- DThe company has lower than average margins
Explanation
Why A — The company has higher future growth prospects than peers
A higher multiple usually reflects higher expected growth or superior performance. B is possible but less likely; C and D would typically result in lower, not higher, multiples.
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