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.

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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.