valuation
EV/EBITDA is enterprise value divided by earnings before interest, tax, depreciation and amortisation. It is the standard capital-structure-neutral earnings multiple used to compare firms and to price cash-generative deals.
EV/EBITDA was built to compare operating firms without letting capital structure dominate the picture. P/E moves when a company draws a loan; EV/EBITDA, done properly, does not. CFA relative-valuation readings and Damodaran's data sets treat it as the default non-financial operating multiple.
EV/EBITDA = enterprise value / EBITDA
The ratio is identical in arithmetic to an EBITDA multiple; this page is about interpretation of the constructed ratio—units, adjustments, and what a 2-turn move actually means.
A firm at 8x LTM EV/EBITDA is priced at eight years of current EBITDA, before tax, capex and working capital. If EBITDA grows, the "years" shrink in hindsight; if it falls, they stretch. Forward EV/EBITDA uses NTM EBITDA and is usually lower for growing firms.
Lease accounting: after IFRS 16, EBITDA rises (rent leaves the operating line) and EV rises (lease liability in net debt). Comparing a post-16 target to a pre-16 peer multiple without adjustment is a 1–2 turn error in lease-heavy sectors (retail, airlines, some logistics).
NCI and associates: if EBITDA is 100% consolidated, EV must include NCI. If associates' EBITDA is excluded, do not add the associate's equity value into EV without also adding its earnings.
Two invented industrial names, same sector, illustration only.
| Firm P | Firm Q | |
|---|---|---|
| EV | €800m | €800m |
| LTM EBITDA | €100m | €80m |
| EV/EBITDA | 8.0x | 10.0x |
| Expected EBITDA growth | 3% | 11% |
| Capex / EBITDA | 45% | 18% |
Q is "more expensive" on the ratio and may still be cheaper on a DCF if growth is real and capex is light. P may be a maintenance-capex trap: EV/EBITDA looks modest, FCFF yield does not. Always pair the ratio with capex and growth.
Trading multiples of comparable companies are usually quoted as EV/EBITDA. Deal announcements are reverse-engineered into the same ratio so a €17bn-class enterprise-value headline can be compared with history. Lenders care because leverage (net debt/EBITDA) and pricing (EV/EBITDA) share a denominator: messy EBITDA pollutes both credit and equity.
EV/EBITDA is silent on tax, maintenance capex, working capital, and SBC. It blows up when EBITDA is near zero. It is the wrong primary metric for financials. Cross-border comparisons need care on pension, lease and one-off cultures.
Dazur reports EV/EBITDA as a defined fraction: named EV bridge, named EBITDA bridge, named period. A two-turn gap versus peers is a research agenda (growth? leases? quality of earnings?), not an automatic discount or premium. That is how the ratio stays a measurement rather than a myth.