EV/EBITDA multiple

EV/EBITDA strips out financing and accounting choices, so it approximates the operating cash generation of a business. That makes it the natural multiple for mature, profitable companies, where earnings are stable enough to be meaningful.

Its weakness mirrors the strength of EV/Sales: EBITDA can be small, volatile or negative for early-stage companies, which makes the multiple meaningless at that end of the spectrum. EBITDA also flatters companies with heavy capital spending or large stock-based compensation, so read it next to free cash flow rather than on its own.

Both EV/EBITDA and EV/Sales sit at the centre of the market approach and move sharply with the cycle, as covered in Multiples Through the Cycle. DealMatrix publishes both, by sector, stage and region.