EV / EBITDA

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Definition

EV/EBITDA is the enterprise value of a company divided by its earnings before interest, taxes, depreciation and amortization. (EV/EBITDA)

EV/EBITDA answers the question "What is a company being valued per each dollar of EBITDA?" A high (low) EV/EBITDA mean the company is potentially overvalued (undervalued).

EV/Financial Metrics are often used by analysts to quickly look at a company's valuation multiples. All things being equal, the lower this ratio is, the better.

Other similar metrics include :
EV/Revenues: How much is each dollar of revenues worth to investors?
EV/EBIT : Or each dollar of EBIT?
EV/Free Cash Flow : Or each dollar of FCF?

Formula

EV / EBITDA = Enterprise Value / Earnings Before Depreciation, Amortization, Interest and Taxes (TTM)

(See other glossary entries for the component calculations)

Related Terms

EBITDA, Enterprise Value, EV / EBIT, EV / EBITDA, EV / Free Cash Flow, EV / Revenues

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