Why is the median preferred over the mean for multiples?
A core Valuation interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
The median is less sensitive to outliers. One company trading at 25x EBITDA (vs. peers at 8–10x) would significantly distort the mean but barely affect the median. With small peer groups (6–12 companies), a single outlier has outsized impact. Always report both but use median as primary reference.
WHAT INTERVIEWERS LISTEN FOR
- ✓Less sensitive to outliers
- ✓Outlier distorts mean
- ✓Small peer groups
- ✓Report both, median primary
COMMON MISTAKES
- ✗Using mean without outlier adjustment
- ✗Ignoring outlier impact
- ✗Claiming median is always better
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