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 on a sample of listed companies to benchmark against. An index now exists providing an average EV/EBITDA multiple on a wide sample of transactions on private companies in the Eurozone (Argos Soditic index).
The reciprocate multiple EBITDA/EV is used as a cash return on investment.
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
External links
- EV/EBITDA on Investopedia.com
- The Hindu Business Line: How retail investors can profit from EV/EBITDA
|
|||||||||||||||||||||||
 |
This economics or finance-related article is a stub. You can help Wikipedia by expanding it. |
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
