EV/EBITDA
From Wikipedia, the free encyclopedia
EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortization or Enterprise Multiple) is a valuation multiple that is often used in parallel with, or as an alternative to, the P/E ratio. Typically, this ratio is applied when valuing cash-based businesses.
An advantage of this multiple is that it is capital structure-neutral. Therefore, this multiple can be used for direct cross-companies application.
Often, an industry average EV/EBITDA multiple is calculated to benchmark against. The reciprocate multiple EBITDA/EV is used as a cash return on investment.
[edit] See also
- Revenue
- Gross profit
- Earnings before interest and taxes (EBIT), or operating profit
- Earnings Before Interest, Taxes, Depreciation, Amortization(EBITDA)
- Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs(EBITDAR)
- Net profit or Net income
- P/E ratio
[edit] External links
- EV/EBITDA on Investopedia.com
- The Hindu Business Line: How retail investors can profit from EV/EBITDA
- Using valuation multiples in small business valuation
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