What Is EV to EBIT Ratio ?
EV to EBIT Ratio:
It is used in comparing similar companies in the same industry. It is used in trading comparables analysis and uses the EBIT of a company as the driver of its value.
It is commonly used valuation multiple to calculate the value of a company. EBIT is unaffected by the capital structure and therefore gives perspective for firm-based value.
For less capital intensive companies, EBIT multiple provides a good comparison and will be close to EBITDA. EBTIDA is multiple valid when comparing capital-intensive companies with varying depreciation policies.
Lower is the better, Should be viewed in tandem with peers. EV/EBIT is often in the range of 10.0x to 25.0x.
Where To Get Data.
EV = Equity value + Debt – Cash & Cash Equivalents
EBIT= Revenue - Operating - Non-Operating expenses
Pros of the EV/EBIT Ratio :-
The EBIT/EV ratio can provide a better comparison than more conventional profitability ratios.