Multiples Approach Explained for Australian Investors (2025 Guide)

In a volatile market, understanding the value of an asset is more important than ever. The multiples approach, a mainstay in business valuation and investment analysis, is evolving with Australia’s financial landscape in 2025. Here’s what investors and business owners need to know.

What is the Multiples Approach?

The multiples approach is a relative valuation technique used to estimate the value of a business or asset by comparing it to similar entities using key financial metrics. Rather than building a detailed discounted cash flow (DCF) model, investors use market-based multiples—like price-to-earnings (P/E), enterprise value-to-EBITDA (EV/EBITDA), or price-to-book (P/B)—to benchmark what similar companies are worth.

In 2025, this approach remains popular among Australian investors for its speed and clarity, especially in sectors where comparable data is robust, such as listed equities, property, and private business sales. With the Australian Securities & Investments Commission (ASIC) tightening disclosure rules and the ASX expanding sector reporting standards this year, accurate and comparable data is more accessible than ever.

Key Multiples and Their Applications

• P/E Ratio (Price-to-Earnings): The classic measure for listed companies, especially in mature industries like banking and retail. As of 2025, the average P/E on the ASX200 sits around 15.2x, slightly below the five-year average, reflecting a more cautious investor sentiment.
• EV/EBITDA: Favoured in sectors with high capital expenditure or varying debt levels (like mining and infrastructure). In 2025, Australian infrastructure deals are being struck at EV/EBITDA multiples ranging from 10–14x, driven by renewed government investment and private capital inflows.
• P/B Ratio (Price-to-Book): Used for asset-heavy industries such as real estate and financial services. The banking sector, for example, is trading closer to book value as tighter APRA capital requirements and softening credit growth weigh on returns.

Each multiple has its quirks—P/E is sensitive to one-off earnings swings, while EV/EBITDA adjusts for debt but can miss capital intensity. The art lies in selecting the right metric for the business context and adjusting for local market conditions.

Real-World Examples: Multiples in Action in 2025

ASX Technology Sector: Australian tech stocks have seen their average P/E ratios contract from over 40x in 2022 to the low 20s in 2025 as higher interest rates and global tech sector volatility reshape expectations. When WiseTech Global announced its 2025 results, investors quickly recalibrated their valuation using peer multiples, reflecting the new normal in tech sector pricing.

Private Business Sales: For small to medium enterprises (SMEs), the multiples approach is critical when negotiating a sale. Business brokers in Sydney report that hospitality businesses are typically valued at 2–3x EBITDA, while professional services firms fetch 3–5x, depending on client concentration and recurring revenue.

Property Development: In commercial property, transactions in Melbourne CBD are benchmarked using gross rent multiples, which currently sit at 18–21x annual rent, a slight uptick from 2024 as international investor interest rebounds.

Regulatory and Market Shifts in 2025

This year, the Treasury’s corporate transparency reforms and ASIC’s enhanced guidance on earnings adjustments mean that investors must scrutinise ‘normalised’ earnings figures more closely. Multiples calculated on non-standardised earnings can mislead, so Australian investors are increasingly demanding transparent, audited accounts and clear explanations for any adjustments.

In addition, the introduction of the Digital Economy Tax Offset (DETO) has shifted how tech startups report EBITDA, leading to debate over how to adjust multiples for government incentives. Meanwhile, APRA’s focus on stress-testing loan books is pushing banks to provide more granular breakdowns, making P/B and P/E comparisons between the Big Four more reliable.

Limitations and Best Practices

• Market Sentiment: Multiples can swing with sentiment. During bull markets, premiums expand; during corrections, they compress—sometimes irrationally.
• Comparability: Always compare apples with apples. Adjust for size, growth prospects, and capital structure.
• One Tool in the Kit: Use multiples alongside DCF and asset-based valuations for a fuller picture.

Australian investors in 2025 are blending multiples with qualitative analysis—like management quality and market positioning—to guard against overpaying based on headline ratios alone.

Conclusion

The multiples approach remains a powerful, practical tool for Australian investors and business owners. With richer data, tighter regulation, and more transparent reporting in 2025, the approach is more effective than ever—if you use it wisely. Whether you’re considering a share purchase, a business sale, or a property acquisition, understanding and applying the right multiples can give you a critical edge in a competitive market.