EV/EBITDA
EV/EBITDA is a fancy way of measuring how expensive a company is to buy.
To understand this, imagine you want to buy a lemonade stand. You could look at how much money the lemonade stand makes (its EBITDA) and how much it costs to buy the stand (its Enterprise Value or EV). Then, you can divide the EV by the EBITDA to figure out how many times more expensive the lemonade stand is to buy than the amount of money it makes.
The same idea applies to big companies that investors might want to buy. By using the EV/EBITDA ratio, investors can compare how expensive different companies are to buy. A lower ratio means that the company is cheaper to buy relative to how much money it makes, while a higher ratio means it's more expensive.
So, just like you would want to get a good deal on a lemonade stand, investors want to find companies with low EV/EBITDA ratios so that they can get more value for their investment.
To understand this, imagine you want to buy a lemonade stand. You could look at how much money the lemonade stand makes (its EBITDA) and how much it costs to buy the stand (its Enterprise Value or EV). Then, you can divide the EV by the EBITDA to figure out how many times more expensive the lemonade stand is to buy than the amount of money it makes.
The same idea applies to big companies that investors might want to buy. By using the EV/EBITDA ratio, investors can compare how expensive different companies are to buy. A lower ratio means that the company is cheaper to buy relative to how much money it makes, while a higher ratio means it's more expensive.
So, just like you would want to get a good deal on a lemonade stand, investors want to find companies with low EV/EBITDA ratios so that they can get more value for their investment.