EBITDA multiple
An EBITDA multiple is applied to earnings before interest, taxes, depreciation, and amortization to estimate enterprise value. A multiple of 6x and EBITDA of EUR 2 million give an enterprise value of EUR 12 million.
An EBITDA multiple expresses enterprise value relative to EBITDA. EBITDA is the calculator's primary valuation method. When suitable data is available, a revenue multiple provides a comparison; when EBITDA is zero or negative, revenue can become the primary basis.
How the multiple is determined
The starting point is a European sector benchmark, adjusted for Mittelstand businesses. Company size is considered separately. Earnings trends, the owner's role, and recurring revenue then determine the further adjustments to the EBITDA multiple.
From the multiple to value
Applying the multiple range to EBITDA gives an enterprise value range. Deducting net debt gives equity value: an estimate of the value of the shares, not a commitment to what a buyer will pay.
Related terms
- Enterprise Value
- Equity Value
- EBITDA
- Revenue multiple
- Net Debt
Sources
- Damodaran, European sector multiples (EV/EBITDA) · NYU Stern
An EBITDA multiple is applied to earnings before interest, taxes, depreciation, and amortization to estimate enterprise value. A multiple of 6x and EBITDA of EUR 2 million give an enterprise value of EUR 12 million.
Related terms