Enterprise Value to EBITDA Calculator: Is It Cheap?

Is a 10.00 EV/EBITDA good or bad?

On the defaults — a $1,500,000 enterprise value and $150,000 of EBITDA — the EV/EBITDA multiple is 10.00. The EV/EBITDA multiple is the price a buyer pays for the whole business for each dollar of yearly operating profit — the enterprise value divided by EBITDA. As a rough yardstick, an EV/EBITDA in single digits can mean the market values the business cheaply against its operating profit — or that the operating profit is about to fall. An EV/EBITDA of 10.00 means the buyer pays $10 for each $1 of annual EBITDA — the market expects the operating profit to keep coming, or the business is expensive for the profit it throws off. An EV/EBITDA in the mid-teens or above can mean the market expects the operating profit to grow — or that the business is expensive for the profit it throws off. A 10.00 EV/EBITDA is neither good nor bad on its own: it is the price per dollar of operating profit, and the industry decides what that price means.

Three things about the model are worth stating plainly.

First, the EV/EBITDA multiple is $1,500,000 ÷ $150,000 = 10.00. Second, the enterprise value needed for a 12.00 EV/EBITDA is 12.00 × $150,000 = $1,800,000. And third, the EBITDA needed for a 12.00 EV/EBITDA is $1,500,000 ÷ 12.00 = $125,000; all listed in Accuracy & limitations.

The worked example, line by line

Setup: $1,500,000 enterprise value, $150,000 EBITDA, target EV/EBITDA 12.00.

Line 1 — the enterprise value. The enterprise value is market capitalisation $1,200,000 + total debt $400,000 − cash $100,000 = $1,500,000.

Line 2 — the EV/EBITDA multiple. The EV/EBITDA multiple is $1,500,000 ÷ $150,000 = 10.00.

Line 3 — the enterprise value needed. The enterprise value needed for a 12.00 EV/EBITDA is 12.00 × $150,000 = $1,800,000.

Line 4 — the EBITDA needed. The EBITDA needed for a 12.00 EV/EBITDA is $1,500,000 ÷ 12.00 = $125,000.

Line 5 — the check. $1,800,000 ÷ $150,000 = 12.00, the target EV/EBITDA; and $1,500,000 ÷ $125,000 = 12.00, the target EV/EBITDA.

Every branch, checked

Enterprise value $1,800,000: Enterprise value $1,800,000.00; EBITDA $150,000.00; EV/EBITDA 12.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $150,000.00 — With an enterprise value of $1,800,000 the EV/EBITDA rises to 12.00 — the buyer pays $12 for each $1 of yearly operating profit.

EBITDA $200,000: Enterprise value $1,500,000.00; EBITDA $200,000.00; EV/EBITDA 7.50; enterprise value needed for the 12.00 target $2,400,000.00; EBITDA needed for the 12.00 target $125,000.00 — With EBITDA of $200,000 the EV/EBITDA falls to 7.50 — the buyer pays $7.50 for each $1 of yearly operating profit.

Enterprise value $900,000: Enterprise value $900,000.00; EBITDA $150,000.00; EV/EBITDA 6.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $75,000.00 — With an enterprise value of $900,000 the EV/EBITDA falls to 6.00 — the buyer pays $6 for each $1 of yearly operating profit.

EBITDA $100,000: Enterprise value $1,500,000.00; EBITDA $100,000.00; EV/EBITDA 15.00; enterprise value needed for the 12.00 target $1,200,000.00; EBITDA needed for the 12.00 target $125,000.00 — With EBITDA of $100,000 the EV/EBITDA rises to 15.00 — the buyer pays $15 for each $1 of yearly operating profit.

Enterprise value $750,000: Enterprise value $750,000.00; EBITDA $150,000.00; EV/EBITDA 5.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $62,500.00 — With an enterprise value of $750,000 the EV/EBITDA falls to 5.00 — the buyer pays $5 for each $1 of yearly operating profit.

EBITDA $0: Enterprise value $1,500,000.00; EBITDA $0.00; EV/EBITDA — (undefined: no operating profit to divide the enterprise value by); enterprise value needed for the 12.00 target —; EBITDA needed for the 12.00 target — — With no EBITDA there is nothing to divide the enterprise value by, so the EV/EBITDA multiple cannot be computed — the calculator shows “—” with a note, never Infinity or NaN.

What-if bars — Enterprise value $2,400,000, EBITDA $300,000, enterprise value $1,200,000: enterprise value $2,400,000: EV/EBITDA 16.00; EBITDA $300,000: EV/EBITDA 5.00; enterprise value $1,200,000: EV/EBITDA 8.00 — A $2,400,000 enterprise value gives an EV/EBITDA of 16.00; EBITDA of $300,000 gives an EV/EBITDA of 5.00; a $1,200,000 enterprise value gives an EV/EBITDA of 8.00.

The reverses, worked backwards

Smallest whole-dollar enterprise value for the EV/EBITDA to reach 10.00: At the displayed $1,500,000 the figures are Enterprise value $1,500,000.00; EBITDA $150,000.00; EV/EBITDA 10.00; enterprise value needed for the 10.00 target $1,500,000.00; EBITDA needed for the 10.00 target $150,000.00. At the displayed $1,500,000 the EV/EBITDA is 10.00 (exactly 10.00). At $1,499,999 the enterprise value is 1 dollar short of the $1,500,000 needed — and the unrounded EV/EBITDA is 9.9999933, which displays as 10.00 after rounding, so $1,500,000 is the smallest whole-dollar enterprise value for the EV/EBITDA to reach 10.00.

Smallest whole-dollar enterprise value for the EV/EBITDA to reach 12.00: At the displayed $1,800,000 the figures are Enterprise value $1,800,000.00; EBITDA $150,000.00; EV/EBITDA 12.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $150,000.00. At the displayed $1,800,000 the EV/EBITDA is 12.00 (exactly 12.00). At $1,799,999 the enterprise value is 1 dollar short of the $1,800,000 needed — and the unrounded EV/EBITDA is 11.9999933, which displays as 12.00 after rounding, so $1,800,000 is the smallest whole-dollar enterprise value for the EV/EBITDA to reach 12.00.

Largest whole-dollar EBITDA for the EV/EBITDA to STAY at or above 10.00: At the displayed $150,000 the figures are Enterprise value $1,500,000.00; EBITDA $150,000.00; EV/EBITDA 10.00; enterprise value needed for the 10.00 target $1,500,000.00; EBITDA needed for the 10.00 target $150,000.00. At the displayed $150,000 the EV/EBITDA is 10.00 (exactly 10.00). At $150,001 the EBITDA is 1 dollar over the $150,000 needed — and the unrounded EV/EBITDA is 9.9999333, which displays as 10.00 after rounding, so $150,000 is the largest whole-dollar EBITDA for the EV/EBITDA to stay at or above 10.00.

Smallest whole-dollar enterprise value for the EV/EBITDA to reach 8.00: At the displayed $1,200,000 the figures are Enterprise value $1,200,000.00; EBITDA $150,000.00; EV/EBITDA 8.00; enterprise value needed for the 8.00 target $1,200,000.00; EBITDA needed for the 8.00 target $150,000.00. At the displayed $1,200,000 the EV/EBITDA is 8.00 (exactly 8.00). At $1,199,999 the enterprise value is 1 dollar short of the $1,200,000 needed — and the unrounded EV/EBITDA is 7.9999933, which displays as 8.00 after rounding, so $1,200,000 is the smallest whole-dollar enterprise value for the EV/EBITDA to reach 8.00.

Largest whole-dollar EBITDA for the EV/EBITDA to STAY at or above 12.00: At the displayed $125,000 the figures are Enterprise value $1,500,000.00; EBITDA $125,000.00; EV/EBITDA 12.00; enterprise value needed for the 12.00 target $1,500,000.00; EBITDA needed for the 12.00 target $125,000.00. At the displayed $125,000 the EV/EBITDA is 12.00 (exactly 12.00). At $125,001 the EBITDA is 1 dollar over the $125,000 needed — and the unrounded EV/EBITDA is 11.9999040, which displays as 12.00 after rounding, so $125,000 is the largest whole-dollar EBITDA for the EV/EBITDA to stay at or above 12.00.

Smallest whole-dollar enterprise value for the EV/EBITDA to reach 15.00: At the displayed $2,250,000 the figures are Enterprise value $2,250,000.00; EBITDA $150,000.00; EV/EBITDA 15.00; enterprise value needed for the 15.00 target $2,250,000.00; EBITDA needed for the 15.00 target $150,000.00. At the displayed $2,250,000 the EV/EBITDA is 15.00 (exactly 15.00). At $2,249,999 the enterprise value is 1 dollar short of the $2,250,000 needed — and the unrounded EV/EBITDA is 14.9999933, which displays as 15.00 after rounding, so $2,250,000 is the smallest whole-dollar enterprise value for the EV/EBITDA to reach 15.00.

A warning about the neighbours: every neighbour above shows as the target when rounded to two decimals, but its unrounded EV/EBITDA is a hair below the target — 9.9999933, 11.9999933, 9.9999333, 7.9999933, 11.9999040 and 14.9999933. A buyer underwriting on the unrounded EV/EBITDA would still say no where the unrounded figure misses the line. The page prints the unrounded neighbour value in full so the rounding does not mislead you: 9.9999933, 11.9999933, 9.9999333, 7.9999933, 11.9999040 and 14.9999933.

What the defaults assume

The defaults are a $1,500,000 enterprise value, $150,000 of EBITDA and a target EV/EBITDA of 12.00 — Enterprise value $1,500,000.00; EBITDA $150,000.00; EV/EBITDA 10.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $125,000.00. With Enterprise value $1,800,000, Enterprise value $1,800,000.00; EBITDA $150,000.00; EV/EBITDA 12.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $150,000.00. With EBITDA $200,000, Enterprise value $1,500,000.00; EBITDA $200,000.00; EV/EBITDA 7.50; enterprise value needed for the 12.00 target $2,400,000.00; EBITDA needed for the 12.00 target $125,000.00. With Enterprise value $900,000, Enterprise value $900,000.00; EBITDA $150,000.00; EV/EBITDA 6.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $75,000.00. With EBITDA $100,000, Enterprise value $1,500,000.00; EBITDA $100,000.00; EV/EBITDA 15.00; enterprise value needed for the 12.00 target $1,200,000.00; EBITDA needed for the 12.00 target $125,000.00. With Enterprise value $750,000, Enterprise value $750,000.00; EBITDA $150,000.00; EV/EBITDA 5.00; enterprise value needed for the 12.00 target $1,800,000.00; EBITDA needed for the 12.00 target $62,500.00. With EBITDA $0, Enterprise value $1,500,000.00; EBITDA $0.00; EV/EBITDA — (undefined: no operating profit to divide the enterprise value by); enterprise value needed for the 12.00 target —; EBITDA needed for the 12.00 target —. With What-if bars — Enterprise value $2,400,000, EBITDA $300,000, enterprise value $1,200,000, enterprise value $2,400,000: EV/EBITDA 16.00; EBITDA $300,000: EV/EBITDA 5.00; enterprise value $1,200,000: EV/EBITDA 8.00. With EBITDA $0, EV/EBITDA — (undefined: no operating profit to divide the enterprise value by). With Enterprise value $0, EV/EBITDA 0.00. With Enterprise value $1,499,999, EV/EBITDA 10.00. With EBITDA $150,001, EV/EBITDA 10.00. With Enterprise value $1,500,000, EV/EBITDA 10.00. With Enterprise value $1,799,999, EV/EBITDA 12.00. With EBITDA −$50,000, EV/EBITDA −30.00 (unrounded −30). With EV/EBITDA bars, enterprise value $2,400,000: EV/EBITDA 16.00; EBITDA $300,000: EV/EBITDA 5.00; enterprise value $1,200,000: EV/EBITDA 8.00.

A note on the rounding: with an enterprise value of $1,499,999 the unrounded EV/EBITDA is 9.9999933, which rounds half-up to 10.00 — but it is still below the 10.00 line. With EBITDA of $150,001 the unrounded EV/EBITDA is 9.9999333, which rounds to 10.00 — but it is still below the 10.00 line. With an enterprise value of $1,799,999 the unrounded EV/EBITDA is 11.9999933, which rounds half-up to 12.00 — but it is just below the 12.00 line. The page prints the unrounded values so the rounding does not mislead you.

Output · formula · meaning

Who uses this

• The investor checking a value stock before buying: they learn a $1,500,000 enterprise value on $150,000 of EBITDA is a 10.00 EV/EBITDA — and they check the $1,800,000 reverse to see the enterprise value a 12.00 EV/EBITDA needs.
• The buyer comparing two companies with different debt loads: they learn the EV/EBITDA multiple already counts the debt in the enterprise value — and they check the $125,000 reverse to see the EBITDA a 12.00 EV/EBITDA needs.
• The value hunter comparing two businesses in one industry: they learn a 10.00 EV/EBITDA in a utility and a 10.00 EV/EBITDA in a software company are different stories — and they check the $1,500,000 reverse to see the enterprise value a 10.00 EV/EBITDA needs.
• The student learning valuation ratios: they learn the EV/EBITDA is the enterprise value divided by EBITDA — the price a buyer pays for the whole business for each dollar of yearly operating profit — and they check the $1,200,000 reverse to see the enterprise value an 8.00 EV/EBITDA needs.

Accuracy & limitations

The math is first-principles: the EV/EBITDA multiple is the enterprise value ÷ EBITDA; the enterprise value needed at the target is the target multiple times the EBITDA; the EBITDA needed at the target is the enterprise value divided by the target multiple — all rounded to two decimals half-up. The reverses are judged on the UNROUNDED EV/EBITDA: a neighbour one dollar short shows as the target when rounded to two decimals, but its unrounded EV/EBITDA is below the target, so it does not meet the bar — the page prints the unrounded neighbour value in full. A negative EV/EBITDA means negative EBITDA: at −$50,000 of EBITDA the EV/EBITDA is −30.00 (unrounded −30) — a negative EV/EBITDA means the business is losing money before interest and tax — operating profit is negative, so the company burns cash on its core work — and a negative EV/EBITDA is not a bargain signal, it is a distress signal — so the EV/EBITDA is negative and the calculator shows the negative figure with a note, never hides it and never shows “—” for it. Zero EBITDA is undefined: with no EBITDA there is nothing to divide the enterprise value by, so the EV/EBITDA multiple cannot be computed — the calculator shows “—” with a note, never Infinity or NaN. What the model cannot do is judge the business: EBITDA is not cash flow — it ignores the capital expenditure the business needs to keep running, so an EV/EBITDA built on a capital-hungry business flatters it, so check what the business must spend to keep running; compare EV/EBITDAs within one industry, because a 10.00 EV/EBITDA in a utility and a 10.00 EV/EBITDA in a software company are different stories; and the EV/EBITDA says nothing about earnings, debt beyond the enterprise value, or the quality of the operating profit. Use it to see the price you pay for the whole business for each dollar of yearly operating profit — then read the rest of the accounts.

Frequently asked questions