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EV/EBITDA Metric Has Been Moved to a New Location


This is affecting Premium Members only

After a while of testing, we have decided to remove EV/EBITDA from our list of metrics available on FAST Graphs. EV/EBITDA has been moved to a more appropriate spot in FUN Graphs under the Valuation Ratios section of the Ratios Graph.

Reasons Why We Have Moved EV/EBITDA

The first reason is that EV/EBITDA is a ratio and not a per share number which is not graphable against stock price in a traditional sense like the Historical Graph and Forecasting Calculators do. For example, Adjusted (Operating) Earnings plots the Adjusted (Operating) Earnings Per Share numbers on the graph and applies a multiple to relate the numbers to stock price. This is due to the fundamental concept that a company is worth more than 1 times earnings. I.e. the orange line for companies that are displaying a 15 multiple is representing 15 times earnings – or more commonly known, a 15 P/E ratio.

That being said, you can think of EV/EBITDA as another type of P/E ratio. The ratio itself is not correlated to stock price, but the per share metric is correlated given a certain ratio (look back at the example given above).

The second reason is that just like a P/E ratio, EV/EBITDA has the stock price already accounted for in the ratio and is found in the EV part of the ratio through Market Cap. The basic formula for EV is:

Enterprise Value = Market Cap + Debt – Cash and Cash Equivalents

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