When assessing a healthy EV/EBITDA ratio, generally, a range between 8 to 12 is considered reasonable for most industries. Below 8 might indicate undervaluation, while above 12 could suggest overvaluation, particularly in mature sectors.
The average EV/EBIT ratio would be 8.7x. A financial analyst would apply the 8.7x multiple to Company A's EBIT to find its EV, and consequently, its equity value and share price.
The formula to calculate the EBITDA margin divides EBITDA by net revenue in the corresponding period. A “good” EBITDA margin is industry-specific, however, an EBITDA margin in excess of 10% is perceived positively by most.
As of 2025-01-11, the EV/EBITDA ratio of Apple Inc (AAPL) is 27.1. EV/EBITDA ratio is calculated by dividing the enterprise value by the TTM EBITDA. Apple's latest enterprise value is 3,656,868 mil USD. Apple's TTM EBITDA according to its financial statements is 134,930 mil USD.
As of today, The Walt Disney Co's enterprise value is $243,293 Mil. The Walt Disney Co's EBITDA for the trailing twelve months (TTM) ended in Sep. 2024 was $14,629 Mil. Therefore, The Walt Disney Co's EV-to-EBITDA for today is 16.63.
The average EBITDA margin of more than 300 software (systems and applications) companies in the U.S at the start of 2023 was 29%. If your startup has an EBITDA margin of 30% or higher, you're tracking to SaaS industry averages and doing great.
Therefore, S&P Global's EV-to-EBITDA for today is 26.84. During the past 13 years, the highest EV-to-EBITDA of S&P Global was 115.14. The lowest was 8.93. And the median was 22.16.
Generally speaking, a good EBITDA margin for manufacturing businesses falls between 5% and 10%. However, this will vary depending on the specific industry you are manufacturing your products for, and how capital-intensive your operations are.
Generally, EV/Sales ratios range between 1 and 3. Anything at or below 1 will be considered a low ratio. Anything at or above a 3 would be regarded as quite high. However, it depends on the industry and the company's competitors, as previously stated.
Both EBIT and EBITDA measure the profitability of a company's core business operations. However, financial analysts commonly favor the EV/EBITDA metric over EBIT due to its ability to offer a consistent, comprehensive, and cash-flow-centric evaluation of a company's operational performance.
As of 2025-01-09, the EV/EBITDA ratio of Target Corp (TGT) is 8.4. EV/EBITDA ratio is calculated by dividing the enterprise value by the TTM EBITDA. Target's latest enterprise value is 75,882 mil USD. Target's TTM EBITDA according to its financial statements is 9,053 mil USD.
EBITDA indicates a company's ability to consistently profit, while net income indicates a company's total earnings. Net income is generally used to identify the value of earnings for every share of the business. It can be calculated using the following formula.
Interpreting EV/EBITDA
Lower ratios generally signify a more attractive valuation. Industry averages vary widely, making sector-specific comparisons far more relevant. A ratio below 10 is often considered attractive, but this isn't a hard-and-fast rule.
As of today, Tesla's Enterprise Value is $1,197,425 Mil. Tesla's EBIT for the trailing twelve months (TTM) ended in Sep. 2024 was $8,730 Mil. Therefore, Tesla's EV-to-EBIT for today is 137.16.
EV/EBITDA is a ratio that compares a company's Enterprise Value (EV) to its Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA). The EV/EBITDA ratio is commonly used as a valuation metric to compare the relative value of different businesses.
The Rule of 40 states that the sum of a healthy SaaS company's annual recurring revenue growth rate and its EBITDA margin should be equal to or exceed 40%. It is a measure of how well a SaaS balances growth with profitability.
The Interest Limitation Rule (ILR) is intended to limit base erosion using excessive interest deductions. It limits the maximum net interest deduction to 30% of Earnings Before Interest, Taxes, Depreciation, Amortization (EBITDA). Any interest above that amount is not deductible in the current year.
The Main Difference Between SDE and EBITDA
SDE – The primary measure of cash flow used to value small businesses and includes the owner's compensation as an adjustment. EBITDA – The primary measure of cash flow used to value mid to large-sized businesses and does not include the owner's salary as an adjustment.
Google (GOOG) EV-to-EBITDA : 18.08 (As of Jan. 12, 2025)
Walmart EV/EBITDA
As of 2025-01-08, the EV/EBITDA ratio of Walmart Inc (WMT) is 21.3. EV/EBITDA ratio is calculated by dividing the enterprise value by the TTM EBITDA. Walmart's latest enterprise value is 766,778 mil USD. Walmart's TTM EBITDA according to its financial statements is 35,972 mil USD.
Tesla (TSLA) Debt-to-EBITDA : 0.76 (As of Sep. 2024)