EV/EBITDA is the enterprise value equivalent of the P/E ratio — it measures what acquirers are paying per dollar of operating earnings. Because it uses enterprise value (which is capital-structure-neutral) and EBITDA (which strips out interest, taxes, depreciation, and amortization), it allows comparison across companies with different leverage, tax situations, and depreciation policies. EV/EBITDA is the most widely used valuation metric in M&A, private equity, and institutional investment analysis.
EV/EBITDA = Enterprise Value / EBITDA (TTM)
GeminIQ divides enterprise value by TTM EBITDA, both derived from SEC filing data. EBITDA is taken from the filing directly or calculated as EBIT + Depreciation & Amortization.
A: Below 8x is generally considered value territory. Between 8x and 15x is moderate. Above 15x is expensive unless justified by growth. The S&P 500 median is roughly 12-14x. Private equity firms typically target acquisitions in the 6-10x range.
A: An acquirer buys the entire business — equity and debt — so enterprise value is the relevant price. EBITDA approximates the pre-investment cash flow of the business before financing and tax decisions, making it comparable across different potential acquisition targets with different capital structures.
A: Both the numerator (EV) and denominator (EBITDA) are sensitive to definition choices. EV depends on debt and cash definitions. EBITDA depends on whether it is calculated from EBIT + D&A or from operating income + D&A, which can produce different results if non-operating items are classified differently. GeminIQ uses EBIT + D&A when EBITDA is not directly reported.