EV/Ebitda

Enterprise value/EBITDA (more commonly referred to by the acronym EV/EBITDA) is a popular valuation multiple used in the finance industry to measure the value of a company. It is the most widely used valuation multiple based on enterprise value and is often used in conjunction with, or as an alternative to, the P/E ratio (Price/Earnings ratio) to determine the fair market value of a company.

Use

An advantage of this multiple is that it is capital structure-neutral, and, therefore, this multiple can be used to directly compare companies with different levels of debt.[1]

The EV/EBITDA multiple requires prudent use for companies with low profit margins (i.e., for an EBITDA estimate to be reasonably accurate, the company under evaluation must have legitimate profitability).

Often, an industry average EV/EBITDA multiple is calculated on a sample of listed companies to use for comparison to the company of interest (i.e., as a benchmark). An example of such an index is one that provides an average EV/EBITDA multiple on a wide sample of transactions on private companies in the Eurozone.[2]

The reciprocate multiple EBITDA/EV is used as a measure of cash return on investment.

gollark: Yes, but you can then get a nice total conversion reactor going on.
gollark: Yep.
gollark: Cooler idea: coil/coolant combination affects "heat dissipation", affecting what fuels you can use.
gollark: Uncool.
gollark: They're not really as cool as self-replicating uranium RTG machines, though.

See also

References
  1. Pharmaceutical Valuation Methodology & Case Studies Archived 2011-07-06 at the Wayback Machine
  2. "Argos Soditic index". Archived from the original on 2009-10-03. Retrieved 2009-09-29.


This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.