EV and Equity Multiples Workout
- 02:02
Calculate the most common multiples based on enterprise and equity value
Transcript
This workout asks us to calculate three multiples: the EBIT, EBITDA and P/E multiples. To clarify, that means calculate EV divided by EBIT, your EV divided by EBITDA. And your share price divided by earnings per share multiples. So we start with the P/E multiple, that's going to be the share price divided by the earnings per share. And I can see that gives me a multiple of 18.7. Next up my EV/EBIT. Well firstly, we need to calculate the EV. In order to do that, we start off by calculating the equity value which is share price times by the shares outstanding. I now need to add onto that any other financing items. So I'll add on non controlling interests, add on the two types of debt (short term and long-term). And then I'll subtract off cash, that means we've got net debt there. That thus gives me my enterprise value, I now need to divide that by the EBIT. And we can use operating profit as our EBIT figure That gives me an EV EBIT multiple of 10.9. Going one step further with the EBITDA multiple, we actually have the same top half. We have to calculate our EV in the same way, so share price times by shares outstanding. I then add on non-controlling interests, add on the short and the long-term debt, minus off the cash. So that's my EV, but now I need to divide that by EBITDA. So operating profit, basically the same as EBIT. And I add on D and A (depreciation and amortization). Thus that's given me my EBITDA multiple of 10.4.