Fundamental analysis
EV/EBITDA
Definition
Enterprise value (market value plus debt minus cash) ÷ earnings before interest, taxes, depreciation and amortization. It compares companies with different amounts of debt, but EBITDA ignores capital spending.
Example
Say company XYZ has a market value of $800 million, $300 million of debt and $100 million of cash, so its enterprise value is $1 billion. With EBITDA of $125 million, its EV/EBITDA is $1 billion ÷ $125 million = 8. If XYZ must spend $80 million a year on equipment just to keep running, that multiple flatters it, because EBITDA counts none of that spending.
Hypothetical numbers, for illustration only.
UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.