Learn / Fundamentals / Valuation / EV/EBITDA
EV/EBITDA = (Market Cap + Debt − Cash) ÷ EBITDA
This number estimates what a buyer would really pay for the whole company — not just the stock. Market cap (stock price × shares) ignores the debt you inherit and the cash you get.
01 Feel it first
Click chips to add debt and subtract cash from market cap — that pile is enterprise value (EV). Then pick an EBITDA preset (rough operating profit before interest, tax, and wear-and-tear) to get the multiple.
02 Break the intuition
Two companies, identical earnings multiples. Peel the cards to see which one is loaded with debt.
03 Build the number
Tap chips to build enterprise value, then divide by EBITDA. That is the multiple a buyer really pays for operating profit.
Enterprise value is $10B ($8B equity + $3B debt − $1B cash). Divided by $1B EBITDA gives EV/EBITDA. This is the whole-company price tag, not just the stock.
04 Compare the stacks
Both firms trade at 15× earnings. Tap each slice to see why EV/EBITDA tells a different story for the buyer.
Both stocks trade at 15× reported earnings. On equity alone, they look equally priced.
Identical 15× P/E, but Firm B's debt load doubles the effective buyout multiple. EV/EBITDA is how you compare whole companies, not just the stock slice.
05 Two flavors
The only difference is whether you add back wear-and-tear on assets. Know what you are adding back.
06 The catch
Utilities and industrials run lower; growth software runs higher. Always compare within peers.
07 Check yourself
08 Where it breaks
EBITDA ignores the cash that must go back into factories and machines. Free cash flow tells a tougher story.
A company with lots of debt can look fine on EV/EBITDA while struggling to cover interest. Check whether profits cover debt payments.
"Adjusted EBITDA" often piles on "one-time" items that keep showing up. Read what got added back.
For a bank, debt is part of the product. Enterprise-value multiples do not map cleanly — use book value and return metrics instead.
Live enterprise value, EBITDA, and peer multiples for any stock — then screen for value that includes debt.
Stock price alone is $80B. A buyer also takes on debt and gets the cash — so the real price is $105B. Divided by $10B EBITDA, the takeover multiple is 10.5×.