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Exit FCF multiple
The multiple applied to terminal-year free cash flow when the exit-multiple method is used instead of Gordon growth.
Updated 2026-09-03
An exit multiple sets the terminal value by assuming the business is worth some fixed multiple of its final projected year, rather than assuming it grows forever. It is the alternative to Gordon growth, and Angie uses it for cyclicals.
The reasoning is that a cyclical company's final projected year is a point on a cycle, not a run-rate. Assuming perpetual growth from whatever the oil price happened to be doing in year five is a category error. A multiple says something more modest and more honest: at the end of the projection, this is a business somebody would pay a normal price for.
Angie's exit multiples by sector. Lower for the more cyclical industries, because a good year there is less likely to represent the future.
See also
- Terminal method — How value beyond the horizon is set: Gordon growth, which assumes cash flow grows forever at a fixed rate, or a multiple applied to the final year.
- Terminal value — Everything the business is worth beyond the projection horizon, set by Gordon growth or an exit multiple and then discounted back. It is usually the majority of the answer.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
