EBITDA/EV Multiple

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DEFINITION of 'EBITDA/EV Multiple'

A financial ratio that measures a company's return on investment. The EBITDA/EV ratio may be preferred over other measures of return because it is normalized for differences between companies. Using EBITDA normalizes for differences in capital structure, taxation and fixed asset accounting. Meanwhile, using enterprise value also normalizes for differences in a company's capital structure.

BREAKING DOWN 'EBITDA/EV Multiple'

While computing this ratio is much more complicated, it is sometimes preferred because it provides a normalized ratio for comparing the operations of different companies. If a more conventional ratio (such as net income to equity) were used, comparisons would be skewed by each company's accounting policies. EBITDA/EV is commonly used to compare companies within an industry.

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RELATED FAQS
  1. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
  2. How can I find a company's EV/EBITDA multiple?

    The EV/EBITDA multiple for a company can be found by comparing the enterprise value, or EV, to the earnings before interest, ... Read Full Answer >>
  3. When consolidating financials, how do you calculate Enterprise Value in cases that ...

    Minority interests are usually the result of joint ventures or acquisitions where the selling party maintains some interest ... Read Full Answer >>
  4. When does a growth stock turn into a value opportunity?

    A growth stock turns into a value opportunity when it trades at a reasonable multiple of the company's earnings per share ... Read Full Answer >>
  5. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  6. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
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