Source: https://guthlabs.ai/docs/instruments/valuation-multiples-comparator/mechanism/

instrument mechanism / verified-clean

# Valuation Multiples Comparator mechanism

The inspectable method record for Valuation Multiples Comparator, kept separate from implementation and qualification.

Status: **VERIFIED_CLEAN**Lifecycle: **verified-clean**

## Model scope

The core P/E and P/B formulas are standard under the per-share price assumption, and EV/EBITDA is standard once EV is supplied with matching units. The specification fails because P/S is omitted, EV is not declared as an input, and peer comparison has no formula or methodology. The educational-only and not-a-buy/sell-signal label is appropriate but does not resolve these mathematical and input-definition gaps.

- P/S is claimed as an output but no P/S formula is provided; the standard formula is price_per_share/sales_per_share, equivalently market_cap/total_sales.

- EV/EBITDA=EV/EBITDA is mathematically correct but the required EV input is missing from the declared inputs.

- Peer comparison and peer delta bars have no defined calculation, including no specified peer aggregation method, baseline, or sign convention.

- The meaning of price is ambiguous: the listed P/E, P/S, and P/B formulas require price per share, not total market capitalization or enterprise value.

## Units and conventions

- price, EPS, sales/share, and book value are all denominated in the same currency per share and over the same reporting period where applicable.

- EV and EBITDA are both total-company values in the same currency and reporting period.

- P/S is assumed to mean price per share divided by sales per share; alternatively, market capitalization divided by total sales produces the same ratio only when the share-count basis is consistent.

- Ratios are dimensionless.

- The numeric outputs below use the standard P/S formula even though that formula is missing from the specification.

## Inspectable vector

One of 4 source-bound review vectors:

````
{
  "inputs": {
    "price": 60,
    "EPS": 3,
    "sales/share": 24,
    "EV": 900,
    "EBITDA": 150,
    "book_value_per_share": 30
  },
  "expected_outputs": {
    "P/E": 20,
    "P/S": 2.5,
    "EV/EBITDA": 6,
    "P/B": 2
  },
  "working": "P/E = 60 / 3 = 20. P/S = 60 / 24 = 2.5. EV/EBITDA = 900 / 150 = 6. P/B = 60 / 30 = 2."
}
````

## Failure boundary

- Division by zero occurs when EPS, sales/share, EBITDA, or book value per share is zero; the implementation needs explicit undefined/error handling rather than Infinity or NaN.

- Negative EPS makes P/E negative and typically unsuitable for ordinary multiple interpretation; negative or zero book value, sales, or EBITDA also requires an explicit labeling policy.

- EV must be defined consistently, typically as equity value plus debt plus preferred equity plus minority interest minus cash and equivalents; omitting components can make EV/EBITDA misleading.

- Period mismatches between price/EV and trailing or forward financial metrics can produce invalid comparisons; the period basis must be explicit.

- Peer deltas are undefined without a specified reference statistic such as peer mean, median, or selected peer, and without a sign convention.

- Currency and scale mismatches, especially cents versus currency units or thousands versus millions, can produce materially incorrect ratios.

## Other records

[01**Overview**](<https://guthlabs.ai/docs/instruments/valuation-multiples-comparator/>)[03**Implementation**](<https://guthlabs.ai/docs/instruments/valuation-multiples-comparator/implementation/>)[04**Qualification**](<https://guthlabs.ai/docs/instruments/valuation-multiples-comparator/qualification/>)

## Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

- `VERIFIED_LEDGER.json`

- `evidence-tranche4/tranche4-results.json`