The second part of Buffett’s rule is a fair price. For this, Greenblatt used what he called the “earnings yield.”39 We call it the Acquirer’s Multiple. To avoid confusion, we’ll call it the Acquirer’s Multiple here. In the next chapter, we’ll look at it in detail. It is a little like the PE multiple, which compares a company’s market cap to its earnings—its profit. The PE multiple is a great rule of thumb to figure out how cheap a company is. The lower the multiple, the cheaper the company.
