How to Use the EV/EBITDA Multiple Calculator
EV/EBITDA divides a company's enterprise value (market cap plus net debt) by EBITDA, a measure of operating cash flow before depreciation. Enter market cap, total debt, cash, and EBITDA to instantly get the multiple.
This ratio is useful because it strips out differences in capital structure and depreciation policy, letting you compare pure operating cash-generating power across companies. That makes it a more reliable yardstick than P/E when comparing firms with different leverage or capital-intensive industries.
A single multiple alone can't confirm whether a stock is cheap or expensive. Always compare it to peer averages within the same industry, and check whether EBITDA includes one-time gains or accounting adjustments before relying on the result.
Frequently Asked Questions
Not necessarily. A low multiple can reflect slowing growth or normal industry patterns, so compare it against peer averages and check whether EBITDA includes one-off items before drawing conclusions.
EV/EBITDA strips out differences in capital structure (debt levels) and depreciation policy, making it better suited for comparing companies with different leverage or capital-intensive industries.
When EBITDA is zero or negative, the multiple becomes meaningless. In that case, analysts typically switch to another valuation metric such as EV/Sales instead.