Price to EBITDA
Price to EBITDA is the ratio of a company's stock price to its per-share Earnings Before Interest, Taxes, Depreciation and Amortization - EBITDA.'
Price to EBITDA is similar in concept to the Price to Earnings Ratio. It measure the amount you, as a shareholder, are paying for a given amount of earnings, and is therefore a measure of how "expensive" the stock is.
However, the P / EBITDA ratio, because it excludes Interest, Taxes, Depreciation and Amortization, can be a better way to compare the underlying businesses of companies with different amounts of debt, or which require big upfront capital investments. Some benefits of using EBITDA include:
Price to EBITDA is used less commonly than Enterprise Value to EBITDA as a measure of the "price" of a company's stock. The EV / EBITDA ratio is useful because, unlike the price to earnings ratio it is capital structure neutral. P / EBITDA uses a metric in the denominator (EBITDA) which is capital structure neutral, but one in the numerator which is not (as stock price does not account for the company's debt).