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Enterprise Value-to-EBITDA (EV/EBITDA)

For informational and educational purposes only • Not investment advice.

Compare EV/EBITDA valuations across companies

Nvidia
Estimated Fair Value$348.67
Current Price$229.28
Valuation Gap52.1%
Historical Median EV/EBITDA35.81x
Current EV/EBITDA23.46x
Detailed valuation
Apple
Estimated Fair Value$229.21
Current Price$336.64
Valuation Gap-31.9%
Historical Median EV/EBITDA20.05x
Current EV/EBITDA29.39x
Detailed valuation
Alphabet
Estimated Fair Value$457.84
Current Price$351.66
Valuation Gap30.2%
Historical Median EV/EBITDA16.64x
Current EV/EBITDA12.69x
Detailed valuation
Microsoft
Estimated Fair Value$592.18
Current Price$535.07
Valuation Gap10.7%
Historical Median EV/EBITDA20.61x
Current EV/EBITDA18.62x
Detailed valuation
Selected EV/EBITDA Multiple

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 Enterprise Value = Historical Market Cap + Historical Net Debt

Historical EV/EBITDA = Historical Enterprise Value / Historical EBITDA

Historical Median EV/EBITDA = Median of the 10 most recent valid EV/EBITDA multiples

The model calculates historical Enterprise Value and historical EV/EBITDA multiples. The median of the 10 most recent valid EV/EBITDA multiples is then used as the company's historical valuation benchmark.

Step 2 — Select the Valuation Multiple

Selected EV/EBITDA = Historical Median EV/EBITDA × Scenario Adjustment

The selected scenario adjusts the historical median EV/EBITDA to determine the valuation multiple used to estimate Fair Value.

Step 3 — Estimate Fair Value per Share

Fair Enterprise Value = EBITDA × Selected EV/EBITDA

Fair Equity Value = Fair Enterprise Value − Net Debt

Fair Value per Share = Fair Equity Value / Shares Outstanding

The selected EV/EBITDA multiple is applied to current EBITDA to estimate Fair Enterprise Value. Net Debt is then subtracted, or Net Cash is added, to determine Fair Equity Value. The resulting equity value is divided by Shares Outstanding to estimate Fair Value per Share.

Step 4 — Compare With the Current Market Valuation

Current Enterprise Value = Current Market Cap + Current Net Debt

Current EV/EBITDA = Current Enterprise Value / Current EBITDA

Valuation Gap = Fair Value per Share / Current Price − 1

Current EV/EBITDA shows the multiple currently assigned to the company's EBITDA, while the Valuation Gap compares the estimated Fair Value with the current stock price.