EV/EBITDA Ratio
A capital-structure-aware multiple whose interpretation depends on enterprise-value scope, EBITDA adjustments, capital intensity, and business risk.
EV/EBITDA divides a selected enterprise value by EBITDA. Both components require judgment: enterprise value may include debt-like claims and noncontrolling interests and subtract selected cash-like assets, while EBITDA may be reported or adjusted. The multiple is generally not meaningful when EBITDA is zero or negative.
Frequently Asked Questions
Is EV/EBITDA always better than P/E?
No. It reduces some financing and tax differences, but ignores capital expenditures, working capital, cash taxes, interest obligations, lease economics, and adjustment quality. The useful metric depends on the business and purpose.
What is a cheap EV/EBITDA multiple?
There is no universal cutoff. Growth, cyclicality, capital intensity, accounting, leverage, asset quality, lease treatment, and risk all affect the multiple.
How should negative EBITDA be handled?
A conventional positive multiple is not meaningful when EBITDA is zero or negative. Review operating losses, cash burn, financing needs, and scenario analysis instead.
Why can providers report different EV/EBITDA figures?
They may use different dates, share counts, debt and cash adjustments, lease treatment, minority interests, pension items, and EBITDA exclusions.