EV/EBITDA
Enterprise value divided by EBITDA — a valuation ratio that, unlike P/E, accounts for a company's debt and cash, making it useful for comparing companies with different capital structures.
What it means
EV/EBITDA divides a company's enterprise value (market cap plus debt, minus cash) by its EBITDA. It answers a similar question to the P/E ratio — how expensive is this company relative to its earnings — but from a capital-structure-neutral angle: enterprise value represents what it would actually cost to acquire the whole company (equity plus assuming its debt, minus the cash you'd immediately have on hand), and EBITDA represents operating earnings before the effects of that same capital structure. Because of that, EV/EBITDA is often preferred over P/E for comparing companies that carry different amounts of debt, or that are being evaluated as acquisition targets, since P/E alone would treat a heavily-indebted company and a debt-free one identically as long as their per-share earnings matched.
How MarketWall calculates it
MarketWall reports EV/EBITDA directly from each stock's weekly Yahoo Finance fundamentals sync. See the Data Sources & Methodology page for the full sync schedule.
How it's typically used
A low EV/EBITDA can mean a genuinely undervalued company, or it can mean the market is pricing in real risk (declining industry, heavy debt load, weak growth) — the same "cheap for a reason vs. genuinely cheap" ambiguity that applies to a low P/E. Its main practical advantage over P/E is in exactly the situations where P/E can mislead: comparing a heavily-leveraged company to a conservatively-financed one, or comparing companies across different tax jurisdictions (since EBITDA is pre-tax, unlike the after-tax earnings P/E uses). It's especially common in private equity and M&A contexts for that same reason — an acquirer has to take on (or pay off) the target's actual debt, so enterprise value is closer to the real cost of the deal than market cap alone. Like every other single ratio on this list, it's most informative compared against a company's own history and its direct competitors rather than as an absolute threshold — "cheap" and "expensive" EV/EBITDA multiples vary meaningfully by industry, with asset-light, high-margin businesses structurally commanding higher multiples than capital-intensive, lower-margin ones.
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FAQ
Why use EV/EBITDA instead of P/E?
EV/EBITDA accounts for debt and cash, while P/E doesn't — it's generally the better comparison when companies carry meaningfully different amounts of debt, or when comparing a potential acquisition target's true cost.
What counts as a 'cheap' EV/EBITDA?
It varies significantly by industry — capital-intensive, lower-margin businesses structurally trade at lower multiples than asset-light, high-margin ones. Comparing within the same industry is far more meaningful than an absolute number.
Why can EV/EBITDA be negative or undefined?
It requires positive EBITDA to mean anything — a company with negative EBITDA (unprofitable even before interest, taxes, and D&A) doesn't have a meaningful EV/EBITDA multiple.
Is enterprise value always bigger than market cap?
Not necessarily — it's market cap plus debt minus cash, so a company with more cash than debt actually has an enterprise value below its market cap.
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