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Updated 1mo ago.
Updated 1mo ago.
Ratio of enterprise value (market cap + debt − cash) to EBITDA (earnings before interest, tax, depreciation, amortization). Used by professionals because it neutralizes capital structure (debt vs equity) and tax — better for comparing companies with very different leverage. EV/EBITDA below 10 is often considered attractive; above 20, expensive.
A company with $10B enterprise value (EV) and $1B EBITDA has an EV/EBITDA of 10. Two firms with the same P/E can have very different EV/EBITDA depending on their debt.
Unlike P/E, this ratio accounts for debt and ignores accounting choices (depreciation, taxes). Ideal for comparing leveraged firms or companies across countries, and widely used to value an acquisition. A low EV/EBITDA can flag a bargain.