What is an EBITDA multiple? An EBITDA multiple is a common ratio used in the valuation of a company. The ratio is calculated by dividing enterprise value by EBITDA. It is also known as the EV/EBITDA ratio.
As EBITDA provides a more comparable figure for earnings, this ratio can be used to see how the company is valued compared to other companies. For example, if company A has an EBITDA multiple of 33x and company B has an EBITDA multiple of 23x, it could indicate that company A is overvalued. However, it should only be used in conjunction with other ratios and research, as there could be valued reasons for the difference. You should also only compare similar companies, as different industries have varied multiples.
EBITDA Exit Multiple
The EBITDA multiple can also be used in financial modelling when calculating terminal value, especially in a discounted cash flow model. In this instance, EBITDA in the final forecasted period is multiplied by the selected EBITDA multiple, hence being called the EBITDA exit multiple.
Further Details & Company Data
For more detailed information, including training, templates and company figures, visit one of the below sites or software providers:
|Site / Software||Description||Link|
|CFI – Corporate Finance Institute||Training, detailed explanations & templates||CFI Website|
|Finbox||Detailed company financials & models||Finbox Website|
|TradingView||Basic company financials & charts||TradingView Financials|
|SharePad||Company financials, news, filters and portfolio management||SharePad Signup Page|
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