EBITDA Multiple Valuation

This problem practices how to think about valuation multiples in context, especially relative valuation and peer comparison. In investment banking interviews, candidates are expected to know that a single EBITDA multiple is not enough on its own, because whether it looks high or low depends on the company’s industry, growth prospects, profitability, cyclicality, and market conditions. Interviewers ask this to see if you can compare a company against relevant peers, understand why different sectors trade at different multiples, and explain valuation using business fundamentals rather than a standalone number.

It also tests whether you can connect valuation to broader industry trends and investor sentiment. A strong answer shows that you would not judge a multiple in isolation, but would first benchmark it against comparable companies and then think through the drivers behind the gap, such as sector quality, recurring revenue, capital intensity, and the stage of the cycle.