EV/EBITDA
What the whole business costs, per dollar of pre-depreciation operating profit.
EV/EBITDA = enterprise value / EBITDAWhat it means
EV/EBITDA is the multiple that works across capital structures. Because the numerator includes debt and the denominator sits above interest, two companies can be compared without their financing choices distorting the answer.
It is the standard multiple in acquisitions for exactly that reason: a buyer takes on the debt and can refinance it, so the price of the operations is what they want to isolate.
Worked example
Enterprise value of $3,400m and EBITDA of $260m.
- 13,400 / 260 = 13.1.
13.1x EV/EBITDA, an ordinary multiple for a profitable business growing steadily.
Every example in this glossary describes the same imaginary company, so the figures join up as you move between metrics.
How investors read it
- Typical ranges vary by industry. Utilities trade around 8 to 12x, software far higher, because the multiple is a claim about future growth.
- Compare against the company's own history as well as its peers. A multiple far above its five-year average needs a reason.
- A low multiple on a business in structural decline is not cheap, it is correctly priced.
Where it misleads
- It inherits every objection to EBITDA, particularly for capital-intensive businesses whose depreciation is a genuine recurring cost.
- It ignores tax, and tax differences between jurisdictions are real cash differences.
- Companies with negative EBITDA produce no meaningful multiple.
How Materiality uses it
One of four metrics in the Valuation category of the scorecard.
The full methodology covers where the figures come from, how the statements are normalised, and what is deliberately left unadjusted.
Related metrics
A metric on its own is a number without a business attached to it. Materialitycomputes these from a company's own SEC filings, several years of them at once, and explains what the pattern means rather than leaving you to hold fifteen definitions in your head.