EV/EBITDA Calculator
Enterprise value and the multiple that compares companies across different capital structures.
Enterprise value counts the debt an acquirer would assume and credits the cash they would receive, which is why it compares companies with different capital structures better than P/E does. EBITDA ignores capital spending, so it flatters asset-heavy businesses that genuinely have to keep buying equipment.
Worked example. A $1B market cap with $300M of debt and $100M of cash has $200M of net debt, so enterprise value is $1.2B. Against $150M of EBITDA that is 8.0x. The debt matters because an acquirer would assume it, and the cash matters because they would receive it, which is precisely what P/E ignores.
Frequently asked questions
Why use EV/EBITDA instead of P/E?
Because it is neutral to capital structure. Two identical businesses financed differently will show very different P/E ratios and similar EV/EBITDA multiples. It also works for companies with negative net income but positive cash generation.
What multiple is cheap?
Entirely sector-dependent. Mature industrials often trade at 6 to 10x, software far higher. The comparison that matters is against close peers and against the company's own history, not a universal threshold.
What is wrong with EBITDA?
It excludes capital expenditure, which is a genuine cost for any business that must keep replacing equipment. Charlie Munger's objection was blunt and fair. For asset-heavy companies EV/EBIT or free cash flow gives a more honest picture.
Why does negative EBITDA show no multiple?
Because a negative multiple invites exactly the wrong reading: it looks like a very low number when it signals the opposite. Nothing is shown rather than something misleading.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.