When evaluating a private equity acquisition, is it better to use forward or trailing multiples?

Trailing multiples are multiples driven off of past cash flows, such as EV / LTM (Last Twelve Months) EBITDA or P / E (LTM).

In private equity, it’s often more appropriate to use trailing multiples because many of the companies being analyzed are private. Private companies will not have forecasts as readily available as public companies, so using trailing multiples is easier.