Metric · Valuation

EV/EBITDA Explained

Q: What counts as an attractive EV/EBITDA?

As a rough guideline, below 8 counts as attractive and above 12 as high. What matters most is always the industry comparison and the actual investment intensity of the business model.

EV/EBITDA relates enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization). Since depreciation is excluded, it's especially useful for comparing companies with different levels of capital investment or depreciation policy.

Updated 20266 min read

Formula

EV/EBITDA = Enterprise value ÷ EBITDA

< 8Attractive valuation

8–12Moderate valuation

> 12High valuation

Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator

Enterprise value

Market cap plus debt, minus cash and equivalents.

Denominator

EBITDA

Operating profit before interest, taxes, depreciation and amortization.

Calculator

Enter your own figures and see the value instantly.

Enterprise value (€m)EBITDA (€m)

Result EV/EBITDA

Moderate valuation

9.3

Low values point to an attractive valuation relative to operating earnings power before depreciation.

Since depreciation has no effect, EV/EBITDA is especially useful for comparing capital-intensive companies of different ages.

As with EV/EBIT: comparing within the same industry gives the most meaningful results.

Used in these strategies

Acquirer's Multiple: EV/EBIT Deep ValueOne factor, applied ruthlessly: the cheapest operating business from an acquirer's view.Graham Net-NetsStocks below liquidation value: the hardest form of value investing.

Frequently asked questions

What is the difference between EV/EBITDA and EV/EBIT?

EV/EBIT accounts for depreciation, EV/EBITDA excludes it. For very capital-intensive companies with high depreciation, EV/EBITDA is therefore usually noticeably lower than EV/EBIT.

What counts as an attractive EV/EBITDA?

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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.

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