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 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.
A typical EBITDA multiple range of 4x to 8x is in the middle of the range for most industries in the lower middle market. There's no single “typical” EBITDA multiple across sizes and industries, this range can serve as a general guideline.
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.
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 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.
While the measure of a good EV/R multiple is different across companies, it's often between 1x and 3x. EV/R is a numeral with an "x" because it's a multiple, and it expresses the value of a company in proportion to its revenue.
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.
A lower EV/EBITDA ratio suggests a company may be more attractive as a potential investment. A low EV/EBITDA ratio indicates that the company's enterprise value (EV) is relatively low compared to its EBITDA. This suggests that the market potentially undervalues the company.
A good EBITDA margin may fall between 15% and 25%, says Simon Thomas, Managing Director of accountancy firm Ridgefield Consulting. Generally, the higher the EBITDA margin, the greater the profitability and efficiency of a company.
Pfizer EV/EBITDA
As of 2025-01-12, the EV/EBITDA ratio of Pfizer Inc (PFE) is 10.9. EV/EBITDA ratio is calculated by dividing the enterprise value by the TTM EBITDA. Pfizer's latest enterprise value is 218,031 mil USD. Pfizer's TTM EBITDA according to its financial statements is 20,036 mil USD.
EV-to-EBITDA is calculated as enterprise value divided by its EBITDA. As of today, NVIDIA's enterprise value is $3,509,808 Mil. NVIDIA's EBITDA for the trailing twelve months (TTM) ended in Oct. 2024 was $74,872 Mil. Therefore, NVIDIA's EV-to-EBITDA for today is 46.88.
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.
Google (GOOG) EV-to-EBITDA : 18.08 (As of Jan. 12, 2025)
As of 2025-01-06, the EV/EBITDA ratio of Nike Inc (NKE) is 16.1. EV/EBITDA ratio is calculated by dividing the enterprise value by the TTM EBITDA. Nike's latest enterprise value is 110,165 mil USD. Nike's TTM EBITDA according to its financial statements is 6,863 mil USD.
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.
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.
A healthy EV/EBITDA ratio for a company is less than 10. It can also indicate that a stock may be undervalued. The average EV/EBITDA ratio for the S&P 500 as of January 2020 is 14.20.
Tesla (TSLA) EV to Sales Ratio: 12.77
The ev to sales ratio for Tesla (TSLA) stock is 12.77 as of Friday, January 10 2025. It's worsened by 35.38% from its 12-month average of 9.43.
One drawback of the EV/EBITDA ratio is that it can produce an overly favorable number because it doesn't include capital expenditures, which can be a huge expense for some companies.
To give you some sense of what the average for the market is, though, many value investors would refer to 20 to 25 as the average P/E ratio range. And again, like golf, the lower the P/E ratio a company has, the better an investment the metric is saying it is.
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.