Business and Personal Finance Dictionary

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• MULTIPLE
  
  A stock's multiple is its price-to-earnings ratio (P/E). It's figured by dividing the market price of the stock by its earnings-either the actual earnings for the past four quarters (called a trailing P/E) or actual figures for the past two quarters plus an analyst's projection for the next two (called a forward P/E). Investors use the multiple as a way to assess whether the price they are paying for the stock is justified by its earnings potential. The higher the multiple they are willing to accept, the higher their expectations for the stock. What's considered high, however, has changed dramatically in recent years as Internet stocks with low earnings (and very high multiples) or no earnings (and therefore no way to compute a multiple) have commanded high prices.
  
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