EV/EBITDA

EV/EBITDA (or EBITDA Multiple) is a valuation tool that looks at how a company’s cash flow compares to the assets being used to generate the cash flow and is simply EV (or Enterprise Value) divided by EBITDA (earnings before interest, tax, depreciation and amortisation).

Investors mainly use a company’s enterprise multiple to determine whether a company is undervalued or overvalued. A low ratio indicates that a company might be undervalued, and a high ratio indicates that the company might be overvalued.