EV/EBITDA Multiple

Also known as: Enterprise Multiple, EV to EBITDA

The EV/EBITDA multiple divides enterprise value by EBITDA, showing how many dollars investors pay for each dollar of operating profit, independent of capital structure.

The EV/EBITDA multiple is one of the most widely used valuation yardsticks. It divides enterprise value by EBITDA, expressing how richly the market values a company’s operating earnings.

Why it is so popular

Because both the numerator and denominator sit above the effects of debt and taxes, the multiple lets you compare companies with different capital structures fairly. That is why it anchors most comparable company analysis and many deal valuations.

What drives a high or low multiple

Faster growth, higher margins, recurring revenue, and lower risk all push the multiple up. A business trading at 14x is being credited for stronger prospects than one trading at 6x, and understanding that gap is central to any valuation conversation.

Related terms

Enterprise Value

Enterprise value (EV) is the total value of a business to all its investors, calculated as equity value plus net debt, and it is the basis for most valuation multiples.

EBITDA

EBITDA is earnings before interest, taxes, depreciation, and amortization, a widely used proxy for a company’s core operating profitability.

Comparable Company Analysis

Comparable Company Analysis, often called comps, values a company by applying the valuation multiples of similar public companies to its own financial metrics.

Price-to-Earnings Ratio

The price-to-earnings (P/E) ratio divides a company’s share price by its earnings per share, showing how much investors pay for each dollar of net profit.

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