A favorite key figure for many investors.
EV/EBIT = Enterprise Value / Earnings before Interest and Taxes EV = (Enterprise Value). Market Capitalisation + Net Indebtedness EBIT = (Earnings before Interest and Taxes). Market Capitalisation = Share Price * Number of Shares.
EV/EBIT is an important valuation key figure that is often used together with P/E.
It differs from P/E in that EV/EBIT also includes the Net Debt.
If the company increases its Net Liabilities, EV/EBIT will also increase. This would not be apparent from P/E.
Things to keep in mind
- A low value indicates a cheaper share.
- EV/EBIT often follows the P/E value.
- If EV/EBIT differs significantly from P/E, it may be because the company's Net Indebtedness is rising or falling.
- Always compare companies within the same industry to estimate a reasonable value.