EBITDA Multiple (EV/EBITDA) Calculator
Calculate the EV/EBITDA multiple — a widely used valuation ratio that compares a company's enterprise value to its EBITDA — to assess how richly or cheaply the market values its operating earnings.
How to use this tool
- Enter market capitalization, total debt, cash & cash equivalents and ebitda in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your ev / ebitda multiple and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Enterprise Value = Market Cap + Total Debt − Cash & Equivalents
EV/EBITDA = Enterprise Value ÷ EBITDA
How it works
The EV/EBITDA multiple is a capital-structure-neutral valuation metric because enterprise value accounts for both debt and equity, making it useful for comparing companies with different leverage profiles. It is calculated by first computing enterprise value — market capitalization plus net debt (total debt minus cash) — then dividing by EBITDA. Lower multiples may indicate undervaluation relative to peers, while higher multiples suggest the market expects strong future growth or pays a premium for quality.
Worked example
Mid-cap company EV/EBITDA
- Market Cap = $50,000,000; Total Debt = $10,000,000; Cash = $5,000,000; EBITDA = $8,000,000
- Enterprise Value = $50,000,000 + $10,000,000 − $5,000,000 = $55,000,000
- EV/EBITDA = $55,000,000 ÷ $8,000,000 = 6.875x ≈ 6.88x
EV/EBITDA Multiple = 6.88x
Common mistakes to avoid
- Using book value of debt when market value of debt differs significantly — for floating-rate or distressed debt, using book value understates or overstates enterprise value.
- Forgetting to subtract cash and equivalents from the enterprise value numerator, which inflates the EV/EBITDA multiple and makes the company appear more expensive than it is.
- Applying EV/EBITDA multiples from a different industry or business cycle without adjustment — capital structure, growth rates, and capital intensity all affect what a fair multiple is.
Key terms
- What is Enterprise Value?
- Enterprise value (EV) represents the total theoretical takeover price of a company. It equals market capitalization plus total debt minus cash and equivalents.
- Why use EV/EBITDA instead of P/E?
- P/E is affected by capital structure (interest expense) and tax regimes. EV/EBITDA is capital-structure neutral, making cross-company and cross-border comparisons more meaningful.
- What is a typical EV/EBITDA range?
- Averages vary widely by industry. Mature sectors (utilities, retail) often trade at 6–10x; high-growth technology companies may trade at 20x or above.
- Why subtract cash from Enterprise Value?
- A buyer acquires the company's cash along with its liabilities. Cash reduces the net cost of acquisition, so it is subtracted to reflect the true operating asset value.
Frequently asked questions
- What is a typical EV/EBITDA multiple?
- Multiples vary widely by industry and cycle. Technology companies often trade at 15-25x, while mature industrials may trade at 6-10x. Always compare within the same sector and peer group.
- Why is EV/EBITDA preferred over P/E for comparing companies?
- EV/EBITDA is capital-structure neutral and adds back non-cash D&A, making it more comparable across companies with different leverage levels and accounting policies than P/E.
- What does a low EV/EBITDA multiple suggest?
- A low multiple relative to peers may indicate the company is undervalued, but it can also reflect lower growth prospects, higher risk, or structural issues in the business.