EV/EBITDA

EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization) is a financial valuation metric used to assess a company’s overall value compared to its earnings. It is calculated by dividing the enterprise value (EV) by the company’s EBITDA. EV/EBITDA is commonly used by investors and analysts to compare the relative value of companies within the same industry, as it provides a clear picture of a company’s profitability without the effects of its capital structure.

Example

A company with an EV of $100 million and an EBITDA of $20 million has an EV/EBITDA ratio of 5, which investors use to compare its valuation against industry peers.