EV/EBITDA

What is EV/EBITDA?

EV/EBITDA divides enterprise value by EBITDA to produce a capital-structure-neutral valuation multiple. Because it uses enterprise value — which reflects both equity and debt holders — and strips out non-cash charges and financing costs, it allows meaningful comparisons across companies with different capital structures, depreciation policies, and tax rates. It is the most widely used multiple in M&A analysis and leveraged buyout modelling. A lower multiple generally indicates a cheaper valuation relative to operating earnings, though the appropriate level varies significantly by industry and growth rate.