What can we analyze from EV/EBITDA : 17.83 VS. 33.42

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Expert Solution

Enterprise value (EV) is equal to its market value of equity(market capitalization) plus it's market value of debt less cash.

EBITDA is earnings before interest,taxes,depriciation and amortization.

EV/EBITDA is the enterprise value of a company divided by it's earnings before interest ,taxes,depriciation and amortization for the trailing twelve months.

A high ratio means the company is potentially overvalued ,on the other hand,a low ratio means the company is potentially undervalued.All things being equal lower this ratio is the better.EV/EBITDA values below 10 are considered to be healthy and above average.

This ratio is mostly used as a valuation metric to compare the relative value of different businesses.it's ideal for analysts and investors those who seek to compare companies within the same industry.This ratio is also used to analyze & measure a company's Return of Investment as well as its value.

In the case given both are unhealthy and below average as both are much above 10.Secondly 17.83 is undervalued than 33.42.On conclusion it can be said that both are not fairly valued.

jeff jeffy answered 8 months ago

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