EV / EBITDA
EV / EBITDA
Simplified enterprise value (market common equity plus interest-bearing debt minus cash) divided by EBITDA. This version assumes no material preferred equity, noncontrolling interest or other required enterprise-value adjustments.
When to use: Use only when the simplified capital structure matches the business. For a complete valuation, include relevant preferred equity, noncontrolling interests and other adjustments consistently with EBITDA.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| EVtoEBITDA | EV/EBITDA | Enterprise value to EBITDA multiple | integer |
| MarketCap | Market Cap | Equity market capitalization | $ |
| Debt | Total Debt | Interest-bearing debt | $ |
| Cash | Cash & Equivalents | Cash and short-term investments | $ |
| EBITDA | EBITDA | Earnings before interest, taxes, depreciation, amortization | $ |
Real-Life Examples
Example 1: Mid-Cap Industrial
Market cap $5B, debt $2B, cash $0.5B, EBITDA $750M.
Given
Step-by-Step
EV/EBITDA of ~8.7× — typical for a mid-cycle industrial. Defensives often trade at 10-12×, cyclicals at 6-8×, technology at 15-25×. Compare against industry medians and historical ranges to gauge relative valuation.
Frequently Asked Questions
No. This simplified version omits preferred equity and noncontrolling interests. Do not use it unadjusted where omitted claims are material.
Use a consistent treatment of excess cash, consolidated subsidiaries, leases and EBITDA. Different adjustment conventions produce different multiples.