A key concept in finance is the P/E ratio, or price-earnings ratio, which measures a company's stock price relative to its earnings. However, to accurately assess a company's value, we must also take into account the present interest rates. This is where the multiplier comes in. The multiplier adjusts the P/E ratio by factoring in the current interest rates, allowing us to better evaluate the expected growth of our investment. In essence, the multiplier helps us make sense of the relationship between a company's earnings, its stock price, and the prevailing interest rates.
