What is EV/EBITDA?
EV/EBITDA compares a company's total enterprise value (market cap plus net debt) to its earnings before interest, taxes, depreciation, and amortisation. Unlike P/E, EV/EBITDA is capital-structure-neutral: it treats debt-financed and equity-financed companies equally, making it ideal for comparing companies across different leverage profiles. It is the most common multiple used in leveraged buyout (LBO) analysis and M&A due diligence. Lower values may suggest undervaluation; higher values reflect premium growth expectations or pricing power. Typical ranges vary widely by industry: media and cable companies have historically traded at high multiples due to predictable subscription revenues.
Formula
EV/EBITDA = Enterprise Value / EBITDA
Enterprise Value = Market Cap + Total Debt − Cash & Equivalents
EBITDA = Operating Income + D&A
Calculator
How to Use
- 1Calculate EV: Market cap + total debt (short + long term) − cash and cash equivalents.
- 2Calculate EBITDA: Operating income (EBIT) + depreciation + amortisation from the cash flow statement.
- 3Divide: EV ÷ EBITDA. A result of 12× means you pay 12 years of EBITDA for the whole enterprise.
- 4Compare: Median S&P 500 EV/EBITDA is roughly 12-15×. Software trades 20-40×; utilities 10-12×.
Worked Example
Example: Industrial company
Market Cap
$5B
Net Debt
$1B
EBITDA
$600M
EV = $5B + $1B = $6B. EV/EBITDA = 6,000 / 600 = 10×. This is in line with typical industrial sector multiples, suggesting fair value at current earnings. A sector peer at 7× may be cheaper on this metric, warranting further investigation.
Auto-fill EBITDA and debt from EDGAR
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Figures from the most recent annual filing (10-K / 20-F), sourced directly from SEC EDGAR.