EV/Ebit - boring title, sexy ratio
Ed Bowsher explains how the EV/Ebit ratio works, and why it’s better than the price/earnings ratio.
In my last video, I looked at the price/earnings ratio (PER), which is probably the best-known investment ratio.
However, the PER has several flaws the biggest of which is it doesnt take a companys debt situation into account. The EV/ebit ratio does reflect a companys debt, so in this video I explain how the EV/ebit ratio works.
See also: Why the price/earnings ratio is flawed