- Formula
- Enterprise value ÷ normalized EBITDA
- Unit
- Multiple (×)
What it measures
EV/EBITDA compares the value of the operating business with normalized earnings before interest, tax, depreciation, and amortization.
How the formula should be applied
Enterprise value is the value of the operations before allocating value between debt and equity holders. The denominator should be maintainable, normalized EBITDA for the same measurement period—not an unadjusted one-off result.
When it is useful
Comparing established operating companies when EBITDA is positive and accounting differences in financing, tax, depreciation, and amortization would otherwise reduce comparability.
How to interpret it
A higher multiple can reflect stronger growth, recurring revenue, defensibility, or lower risk. It is not automatically a higher equity value: net debt, debt-like items, surplus cash, and working-capital adjustments still bridge enterprise value to equity value.
Important limitations
- EBITDA can overstate cash generation in capital-intensive or working-capital-heavy businesses.
- Normalization choices must be evidenced; owner pay, exceptional costs, leases, and related-party items can materially change the denominator.
- Sector, geography, size, growth, concentration, and evidence vintage must match the comparison being made.
Worked example
At 5.0× normalized EBITDA of €600,000, the indicated enterprise value is €3.0 million. Equity value is calculated only after applying the company-specific net-debt and other bridge adjustments.
Method and provenance
This page defines the metric. Published values, percentiles, sample coverage, geography, confidence, vintage, and source references belong to the relevant business-type dataset and must be read there.