The “EV/EBITDA” Ratio
Formula:
Enterprise Multiple = EV/EBITDA
where,
- EV = Enterprise Value = Market Capitalization + Total Debt - Cash and cash equivalents
- EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization
Enterprise multiple can be used as an alternative or to supplement the P/E ratio.
What is a good EV/EBITDA Ratio?
- Lower the number, the better.
- Less than 10.0 is considered good.