Pricing a manufacturer from the market multiple

A manufacturing company earns $1 million a year. The broad market trades on a price-to-earnings ratio of 20. What is the company worth?

About $20 million as a first cut. Applying the market P/E gives $20\times\text{\char36}1\text{m}$. Then adjust: use the manufacturing sector's own multiple rather than the market's, reflect the firm's growth and risk, and apply a discount if it is small, private or illiquid, which usually puts it below $20 million.