Definition
EV/EBITDA is one of the most widely used valuation metrics for comparing companies regardless of capital structure or accounting differences. It's especially useful for M&A analysis and comparing companies across countries with different tax rates.
Formula
EV/EBITDA = Enterprise Value / EBITDA
Example
A company with $10 billion enterprise value and $1 billion EBITDA trades at 10x EV/EBITDA. Industrial companies typically trade at 8-12x, while software companies may trade at 15-25x.
FAQ
What is EV/EBITDA?
A valuation multiple comparing enterprise value to earnings before interest, taxes, depreciation, and amortization.
How do you calculate EV/EBITDA?
A common formula for EV/EBITDA is: EV/EBITDA = Enterprise Value / EBITDA
Why is EV/EBITDA important?
EV/EBITDA helps investors evaluate valuation and make more informed decisions.