A key figure for valuation.
EV/EBITDA = Enterprise Value/EBITDA EV = Market Capitalisation + Net Indebtedness. EBITDA = Profit before Interest Expenses, Taxes, Depreciation and Amortisation. Market Value = Share Price * Number of Shares.
Unlike EV/EBIT, EV/EBITDA also takes depreciation and amortisation into account. The calculation is simply made a bit further up in the balance sheet.
Things to think about
- A low value indicates a cheaper share.
- EV/EBITDA contains many adjustments and is sometimes used by companies to project an enhanced portrayal of reality.
- Always compare companies within the same industry to estimate a reasonable value.