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Enterprise Value-to-EBITDA (EV/EBITDA)

For informational and educational purposes only • Not investment advice.

Apple

iPhone, services, devices

Estimated Fair Value

$229.21

Stock price: $333.69

Fair value below stock price

This model estimates a company's fair value by applying its historical EV/EBITDA multiple to current EBITDA.

Historical EV/EBITDA Multiples

This chart shows the company's historical EV/EBITDA multiple by year.

2016: 8.10x EV/EBITDA8.10x20162017: 11.21x EV/EBITDA11.21x20172018: 8.85x EV/EBITDA8.85x20182019: 15.70x EV/EBITDA15.70x20192020: 27.46x EV/EBITDA27.46x20202021: 23.79x EV/EBITDA23.79x20212022: 16.31x EV/EBITDA16.31x20222023: 24.14x EV/EBITDA24.14x20232024: 28.32x EV/EBITDA28.32x20242025: 28.16x EV/EBITDA28.16x2025

Key Valuation Metrics

Selected EV/EBITDA Multiple

Notes

• The current EV/EBITDA multiple is meaningfully above the historical median, suggesting the stock may be overvalued relative to its historical EV/EBITDA valuation.
• The historical EV/EBITDA range is wide, meaning the valuation is sensitive to which historical multiple is used.

What is Enterprise Value-to-EBITDA (EV/EBITDA) Valuation?

Enterprise Value-to-EBITDA (EV/EBITDA) Valuation estimates a company's Fair Value based on its EBITDA and the EV/EBITDA multiple applied to that EBITDA.

The EV/EBITDA ratio compares a company's Enterprise Value with its EBITDA. It shows how the market values the company's operating earnings before interest, taxes, depreciation and amortization.

Historical EV/EBITDA multiples show the valuation levels at which the company's operating business has traded in the past. They can be used as a reference for estimating Fair Enterprise Value from current EBITDA.

EV/EBITDA Valuation is most useful for companies with positive and relatively stable EBITDA, but it may be less reliable when EBITDA is highly cyclical or changes materially over time.

How the EV/EBITDA Model Works

The EV/EBITDA model estimates fair value by calculating the company's historical EV/EBITDA multiples, selecting a valuation multiple, applying it to EBITDA, and converting Enterprise Value into equity value per share.

Historical EBITDA & Enterprise Value
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Calculate Historical EV/EBITDA
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Select Valuation EV/EBITDA
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Estimate Fair Enterprise Value
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Fair Value per Share

EV/EBITDA Formula

EV/EBITDA=Enterprise ValueEBITDA \text{EV/EBITDA} = \frac{ \text{Enterprise Value} }{ \text{EBITDA} }
Enterprise Value=Market Capitalization+Net Debt \text{Enterprise Value} = \text{Market Capitalization} + \text{Net Debt}
Net Debt=Total Debt−Cash & Short-Term Investments \text{Net Debt} = \text{Total Debt} - \text{Cash \& Short-Term Investments}

Key Model Assumptions

• The company must have positive EBITDA.
• Current EBITDA is based on trailing twelve-month (TTM) operating results when four consecutive quarterly periods are available; otherwise, the latest annual EBITDA is used.
• Historical EV/EBITDA multiples require valid EBITDA, market value and balance sheet data.
• The 10 most recent valid historical EV/EBITDA multiples are used to estimate the company's typical valuation multiple.
• The historical median EV/EBITDA forms the Base valuation assumption.
• Conservative and optimistic scenarios adjust the historical median EV/EBITDA.
• Historical EV/EBITDA multiples may not remain representative if the company's profitability, capital structure or operating performance changes materially.

Step 1 — Calculate Historical EV/EBITDA Multiples

Historical EV/EBITDA = Historical Enterprise Value / Historical EBITDA
Historical Median EV/EBITDA = Median of the 10 most recent valid historical EV/EBITDA multiples
Historical Median EV/EBITDA = 20.05x

The model calculates historical EV/EBITDA multiple by dividing historical enterprise value by historical EBITDA. It then uses the 10 most recent valid EV/EBITDA multiples to determine the company's typical historical valuation multiple. For Apple, the historical median EV/EBITDA is 20.05x.

Step 2 — Select the Valuation Multiple

Selected EV/EBITDA = Historical Median EV/EBITDA × Scenario Adjustment (Base)
Selected EV/EBITDA = 20.05x × 100% = 20.05x

The selected scenario adjusts the historical median EV/EBITDA multiple to reflect a more conservative or optimistic valuation assumption. Under the base scenario, the model uses an EV/EBITDA multiple of 20.05x.

Step 3 — Estimate Fair Value per Share

Fair Enterprise Value = EBITDA × Selected EV/EBITDA
Fair Enterprise Value = $169.0B × 20.05x = $3388.4B
Fair Equity Value = Fair Enterprise Value − Net Debt
Fair Equity Value = $3388.4B − $21.9B = $3366.5B
Fair Value per Share = Fair Equity Value / Shares Outstanding
Fair Value per Share = $3366.5B / 14.69B = $229.21

The selected EV/EBITDA multiple is applied to Apple's current EBITDA to estimate Fair Enterprise Value. Net Debt is then subtracted to determine Fair Equity Value, which is divided by Shares Outstanding to estimate a Fair Value per Share of $229.21.

Step 4 — Compare With the Current Market Valuation

Current EV/EBITDA = Current Enterprise Value / Current EBITDA
Current EV/EBITDA = $4923.0B / $169.0B = 29.13x
Valuation Gap = Fair Value per Share / Current Price − 1
Valuation Gap = $229.21 / $333.69 − 1 = -31.3%

Current EV/EBITDA shows the multiple currently assigned to Apple's EBITDA. The company currently trades at 29.13x compared with a historical median of 20.05x.

The Valuation Gap compares the estimated Fair Value with the current stock price of $333.69. Under the current assumptions, the Valuation Gap is -31.3%.