EV/EBITDA multiple

The EV/EBITDA multiple divides enterprise value by EBITDA to produce a capital-structure-neutral valuation benchmark.

ByHoang TruongUpdated July 3, 2026

FrameworkRelative valuation

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A target company has an enterprise value of €480 million and EBITDA of €60 million, giving an EV/EBITDA multiple of 8 times. Because enterprise value is neutral to capital structure and EBITDA adds back depreciation and amortisation, the multiple lets analysts compare businesses financed or depreciated differently, and lets a peer multiple be applied to a target's own EBITDA.

Where it fits

SubjectCorporate FinanceCoreTopicBusiness Valuation & DCFCoreTopicBond & Equity ValuationCore

The formula

LaTeX

EV = \text{Market cap} + \text{Debt} - \text{Cash}

Variables

$E V$: enterprise value: total market value of the firm's operating assets
$M a r k e t c a p$: shares outstanding multiplied by current share price
$D e b t$: total financial debt (short-term plus long-term)
$C a s h$: cash and cash equivalents (non-operating)

EV is capital-structure-neutral: it represents the cost of acquiring 100% of the operating business. Adding debt and subtracting cash reflects that an acquirer inherits the debt but can immediately apply the cash.

LaTeX

\text{Multiple} = \frac{EV}{EBITDA}

Variables

$E V$: enterprise value as defined above
$E B I T D A$: earnings before interest, tax, depreciation and amortisation for the period

Using EV removes capital-structure effects; using EBITDA removes differences in depreciation policy, enabling cross-company comparison. Sector medians vary widely — mature consumer businesses may trade at 8–12×, high-growth sectors considerably higher.

LaTeX

\text{Equity value} = M_{\text{peers}} \times EBITDA_{\text{target}} - \text{Net debt}

Variables

$M_{p} eer s$: peer-group median or mean EV/EBITDA multiple
$E B I T D A_{t} a r g e t$: trailing or forward EBITDA of the company being valued
$N e t d e b t$: total debt minus cash and equivalents at the valuation date

Applying the peer multiple to target EBITDA gives implied EV; deducting net debt bridges to equity value. Dividing by shares outstanding yields implied value per share.

Check yourself

PracticeCORE

Company A has a market capitalisation of €600m and net debt of €200m; its EBITDA is €100m. Company B has a market capitalisation of €500m, is debt-free, and earns EBITDA of €80m. Which company trades at the higher EV/EBITDA multiple?

Select an answer to check your understanding.