Introduction
EV/EBITDA (Enterprise Value / EBITDA) is the valuation multiple most used by professionals because it eliminates capital structure, taxes and depreciation distortions.
Explication
Enterprise Value = Market Cap + Debt - Cash. It represents the total value of the company including debt. EV/EBITDA compares this total value with EBITDA (operating profit before interest, taxes, depreciation).
Formule
EV = Market Cap + Total Debt - Cash
EV/EBITDA = Enterprise Value / EBITDA
Exemple
Company A vs B: - Company A: Market Cap $100B, Debt $0, Cash $20B → EV = $80B. EBITDA $10B → EV/EBITDA = 8× - Company B: Market Cap $100B, Debt $40B, Cash $0 → EV = $140B. EBITDA $10B → EV/EBITDA = 14× Although both have the same Market Cap, Company B is more expensive because it has debt.
Comment l'interpréter
EV/EBITDA < 10× = reasonable valuation. 10-15× = moderate rating. > 20× = heads. Varies by sector: Software SaaS 15-30×, Manufacturing 6-10×, Utilities 8-12×. Private equity uses EV/EBITDA to evaluate acquisitions because it is "cleaner" than P/E. Red flag: EV/EBITDA >30× without exceptional growth = bubble.
Points clés
- EV/EBITDA = favorite multiple of professionals
- EV = Market Cap + Debt - Cash
- Eliminates capital structure distortions
- EV/EBITDA < 10× = reasonable, >20× = expensive
- SaaS: 15-30×, Manufacturing: 6-10×
- Private equity used to evaluate acquisitions