EV/EBITDA
The value of the whole business, debt included, relative to its EBITDA.
Formula
EV/EBITDA = \frac{\text{Market capitalisation} + \text{Net debt}}{EBITDA}Enterprise value is market capitalisation plus net debt; EBITDA is trailing twelve months.
How to read the number
Unlike P/E it accounts for debt, which makes companies with different capital structures more fairly comparable.
When the metric lies
Not applicable to banks: for them debt is the raw material of the business rather than a burden. With negative EBITDA the ratio loses meaning.
Where it is used
The metric is calculated across every security in the catalogue and appears on the instrument card, in the multiples table and in the screener.
Also known as: ev/ebitda, enterprise value to ebitda