EV/Ebita is a valuation method often used by analysts. Enterprise value (EV) combines a firm's equity (its market capitalisation the number of shares multiplied by the share price) and net debt on the balance sheet (long- and short-term debt less cash).
So if a firm has a market cap of £100m, long and short-term debt of £50m, and cash of £10m, its EV is £140m (100 + 50 10). This can be compared to earnings before interest, tax and amortisation (Ebita) to give a valuation ratio called EV/Ebita.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Millions of over 50s fear pension investment risk – how should you position your portfolio?To de-risk or not to de-risk, that is the question. Act too late and you could face irreversible losses. Move too early and miss out on significant gains that could transform your retirement.
-
£150 off energy bills: millions more to get discount this winterThe expansion of the Warm Home Discount scheme follows a government U-turn on the Winter Fuel Payment. We explain who will get the £150 discount
