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
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
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Ed has been a private investor since the mid-90s and has worked as a financial journalist since 2000. He's been employed by several investment websites including Citywire, breakingviews and The Motley Fool, where he was UK editor.
Ed mainly invests in technology shares, pharmaceuticals and smaller companies. He's also a big fan of investment trusts.
Away from work, Ed is a keen theatre goer and loves all things Canadian.
Follow Ed on Twitter
-
Family must pay £176k inheritance tax bill due to common gifting error – how you can avoid it
Giving gifts can reduce inheritance tax liabilities, but it’s important to avoid falling foul of the rules
By Laura Miller Published
-
Is a mortgage in retirement always a bad idea?
A mystery shopper exercise shows high street lenders are “shunning” retirees looking to take out a mortgage. Are they right to do so?
By Katie Williams Published