EBITDA Multiple

An EBITDA multiple is a simple way to estimate the value of a company by comparing its profits,or EBITDA, (earnings before interest, taxes, depreciation, and amortization) to how much buyers are willing to pay. It’s like using a price tag that’s based on the company’s earnings—if the multiple is 6x, and the company earns $2 million in EBITDA, it’s valued at around $12 million.

This method is often used in buying and selling businesses. The multiple is a function of many factors including market conditions, relative growth rate, profitability and durability of expected future cash flows.