What is EV/EBITDA?
EV/EBITDA compares a company's enterprise value (market cap plus debt minus cash) to its EBITDA. Unlike P/E, it accounts for capital structure and is therefore better for comparing companies with different debt loads. Lower multiples generally indicate cheaper valuations.
Formula
EV/EBITDA = (Market Cap + Debt − Cash) ÷ EBITDA
How TopTier Strategy uses EV/EBITDA
We use EV/EBITDA as a complement to P/E in the Valuation pillar — especially for capital-intensive businesses like industrials and telecoms where depreciation distorts net income.
Related Glossary Terms
Other concepts in the Valuation pillar.
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