EV/Ebita ratio
EV/Ebita is a valuation method often used by analysts, sometimes used instead of the p/e ratio to compare growth between firms in heavy debt sectors
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.
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