EV/EBITDA
- Created by
- Renato Passos, Eng. de Software
- Reviewed by
- Renato Passos, Eng. de Software
Last updated: Apr 18, 2026
About this calculator
The EV/EBITDA calculator is a financial tool used to evaluate a company's value by comparing its Enterprise Value (EV) to its operating income (EBITDA). This metric helps assess the relationship between the cost of acquiring a company and its operational profits, making it useful for comparing companies in the same industry.
The calculation is done by dividing Enterprise Value (market capitalization plus debt minus cash) by EBITDA (earnings before interest, taxes, depreciation, and amortization). The formula: EV/EBITDA = (Market Cap + Debt - Cash) / EBITDA. The result is a multiple indicating the company's valuation relative to its operating earnings.
This metric is particularly useful for investors comparing companies in the same sector or evaluating investment opportunities. A low EV/EBITDA might signal an undervalued company, while a high multiple suggests a premium valuation. However, contextual industry factors and capital structure should be considered for accurate interpretation.
Common precautions include analyzing companies with high capital expenditures (CAPEX), as EBITDA ignores depreciation. Multiples can also be distorted by complex debt structures. It is advisable to cross-check with other metrics like P/E or EV/Revenue for a comprehensive view.
Frequently asked questions
How to calculate EV/EBITDA?
Use the formula: EV/EBITDA = (Market Cap + Debt - Cash) / EBITDA. Enter the relevant values into the calculator to get the multiple.
When should I use EV/EBITDA?
Use it to compare companies in the same industry or assess the reasonableness of an acquisition price.
What is the ideal EV/EBITDA?
There's no universal ideal value. Multiples vary by sector and growth stage. Mature companies typically have lower multiples than startups.
Why is EBITDA used in the calculation?
EBITDA standardizes earnings by excluding interest, taxes, and non-operational expenses, focusing on operational cash flow.
What are the limitations of EV/EBITDA?
It ignores capital expenditures and can be influenced by debt decisions. Use it alongside other metrics for a complete analysis.