A company trades at 20x NTM EBITDA but its growth is decelerating. How do you think about whether this multiple is justified?

Answer

Justify the multiple by analyzing: (1) PEG ratio — divide P/E or EV/EBITDA by the growth rate; high multiples should be supported by high growth; (2) Margin expansion — is the EBITDA margin still growing? (3) Competitive moat — pricing power, switching costs; (4) Comparable company context — what do peers with similar growth profiles trade at?