Glossary
EV / EBITDA
Enterprise value divided by earnings before interest, tax, depreciation, and amortisation.
EV/EBITDA divides enterprise value by earnings before interest, tax, depreciation, and amortisation. It normalises for capital structure (because EV includes net debt) and accounting policies (because EBITDA strips out non-cash and financing items), which makes it the favourite multiple in M&A.
Lower means cheaper relative to operating cash generation. Industry norms vary widely: software trades 15–25×, industrials 7–12×, utilities 6–10×.
EBITDA is not free cash flow — capex still has to be paid. A high-EBITDA firm with heavy capex needs (semiconductors, telecom) can show weak free cash flow despite a strong EBITDA line.