A multiple compresses growth, risk, capital intensity and durability into one number — its value and its danger. Use multiples to compare and to ask questions, never to conclude. Underneath all of them: a multiple is justified by returns on capital, growth, and the persistence of both.
Low P/E with durable earnings pays you a high earnings yield to wait; low P/E on peak-cycle or structurally eroding earnings is the classic value trap, where the E evaporates faster than the price. PEG is the most abused ratio in the toolkit because it treats growth as linear and free. P/S ignores cost structure entirely. EBITDA pretends assets last forever, which is why EV/EBIT is the harder, more honest test.
FCF yield is the closest thing to a real return on your purchase price — but a high one can be a melting ice cube, cash harvested by under-investing in a business that needs the capex. Never compare a multiple to a single number: compare it to its own ten-year band, to peers on identical definitions, to a reverse DCF, and to what the last deal in the industry paid.
Educational, not investment advice.