1. What Is Enterprise Value?
Enterprise Value (EV) is the total price to buy an entire company — not just its equity, but its debt too, minus the cash you'd get to keep. It answers: what would it really cost to acquire this business outright?
Why add debt? Because an acquirer inherits it. Why subtract cash? Because the buyer can use it to pay down the purchase. EV is therefore a truer measure of takeover cost than market capitalization alone.
2. What Is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It strips out financing and accounting decisions to approximate a company's core operating cash generation.
Why strip these out? Interest depends on how a company is financed, taxes depend on jurisdiction, and depreciation is a non-cash accounting figure. Removing them lets you compare the raw earning power of two businesses side by side.
3. The EV/EBITDA Multiple
This multiple tells you how many years of operating earnings it would take to pay back the full cost of acquiring the company. A lower multiple generally means a cheaper valuation.
- •Below 8x is often considered inexpensive, common for mature or slow-growth firms.
- •8x–12x is a typical range for healthy, stable companies.
- •Above 15x usually signals high growth expectations — or an expensive stock.
4. EV/EBITDA vs. P/E
EV/EBITDA has two big advantages over the P/E ratio:
Debt-Neutral
P/E only looks at equity, ignoring debt. EV/EBITDA includes it, so you can fairly compare a debt-free company with a heavily leveraged one.
Cross-Border Friendly
By excluding taxes and financing, EV/EBITDA smooths out differences in tax regimes and capital structures across countries.
This is why EV/EBITDA is the go-to multiple in mergers and acquisitions — it reflects the true cost of the whole business, regardless of how it's financed.
5. Limitations
EBITDA ignores real costs
Depreciation reflects genuine wear on assets. For capital-intensive businesses like airlines or telecom, ignoring it overstates true profitability. Charlie Munger famously called it "bulls*** earnings."
Ignores capital expenditure
A company may look cheap on EV/EBITDA but burn all its cash on equipment. Always check free cash flow too.
Not ideal for banks
Financial firms' interest is core to their business, so EV/EBITDA doesn't apply cleanly. Use price-to-book instead.
6. Using EV/EBITDA on WIT
WIT stock pages surface enterprise value and EBITDA-related figures. To use them: