The EV2EBITDA ratio compares the value of a company, debt and cash included, to the company’s operating income plus depreciation and amortization.

Thanks to a normalization of financial structure and weight of non cash expenses, EV2EBITDA is less variable than PE and it is better suited to compare stocks from different sectors and industries.

The lower the EV2EBITDA, the cheaper the valuation for a company. Another way to look at this ratio is how much cash can the company generate without reinvesting in hard assets.

Formula

EV2EBITDA = EV / EBITDA

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