The price-to-EBITDA per share ratio is a valuation metric that compares a company's market price per share to its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) per share. It is calculated by dividing the stock's market price per share by its EBITDA per share.
The ratio helps investors assess the relative value of a stock by comparing its price to its underlying earnings before certain non-cash expenses (depreciation and amortization) and financing costs (interest and taxes). By using EBITDA, which removes non-operating expenses and focuses on core profitability, the ratio provides a clearer picture of a company's operating performance.
In summary, the price-to-EBITDA per share ratio is a measure of how much investors are willing to pay for a company's earnings before significant non-cash and financing components.
The Price-to-EBITDA per share ratio is a financial metric used to measure a company's valuation. It is calculated by dividing the stock's market price per share by its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) per share. EBITDA represents a company's operating profitability by looking at its earnings before accounting for interest expenses, taxes, and non-cash expenses such as depreciation and amortization.
The Price-to-EBITDA per share ratio evaluates the market value of a stock relative to its underlying operational performance. It is often used as a valuation tool because it provides a clearer picture of a company's operating cash flow compared to traditional earnings measures that can be influenced by accounting methods or one-time events. The lower the ratio, the more undervalued the stock may be considered, while a higher ratio could indicate an overvalued stock.