Enterprise Value Multiples

EV/EBITDA is the most widely used enterprise value multiple in investment banking. It is preferred because EBITDA approximates operating cash flow before capital structure and tax effects, and it normalizes for differences in depreciation policies. Typical EV/EBITDA ranges vary by industry — technology companies may trade at 15-25x while mature industrials trade at 6-10x. Lower EV/EBITDA multiples generally indicate cheaper valuations, though context matters.

EV/Revenue is used when a company has negative or volatile EBITDA, making earnings-based multiples unreliable. It is common for early-stage high-growth companies, SaaS businesses, and biotech firms. EV/Revenue ignores profitability entirely, so it must be paired with margin analysis to be meaningful. A company trading at 10x revenue with 50% margins may be cheaper than one at 5x revenue with 10% margins.

EV/EBIT accounts for depreciation and amortization, making it more conservative than EV/EBITDA. It is particularly useful for comparing companies with significantly different capital intensity or asset ages. EV/EBIT is favored in industries where D&A represents a real ongoing cost of doing business, such as manufacturing, telecom, and transportation. Since EBIT is smaller than EBITDA, EV/EBIT multiples are mathematically higher than EV/EBITDA for the same company.

The choice of EV multiple depends on the industry, stage of the company, and the specific analysis. EV/EBITDA is the default for most sectors and is expected in banking interviews. EV/Revenue is appropriate when profitability is negative or not yet meaningful. EV/EBIT is used when D&A differences distort EBITDA comparisons. In practice, analysts often present multiple EV multiples side by side in valuation summaries and football field charts.