EBIT/EV = EBIT/Enterprise Value EBIT = Earnings before interest and taxes EV = Market Capitalisation + Net Indebtedness Market Capitalisation = Number of Shares * Share Price
Shows EBIT in relation to Enterprise Value in percentage form.
Things to keep in mind
- A higher percentage value is positive as it shows a higher result compared to EV.
- EBIT/EV enables investors to compare earnings between companies with different debt levels.
- A disadvantage of EBIT/EV is that it is not normalised for depreciation costs