Why use EV?

P/E is probably the most popular valuation and cleanest metric, but it does not account for different capital structure and tax structures. EV is an important valuation parameter as it captures the total value of the company, including debt and investments. Using EV facilitates comparisons between companies and accounts for different capital structures and tax differences.

Overview of Valuation Tools

Enterprise Value Multiples: The three most important measures are EV to sales, EV per unit of capacity (depending on the sector), and EV to EBITDA.

• EV/Sales
• EV/EBITDA
• EV/EBITA
• EV/EBIT
• EV/(EBITDA - CAPEX)
• EV/Capital Employed
• FCF Yield
  

Equity Value Multiples:

• P/E
• Price to book
• Price to sales
• Price to cash flow
• FCF Yield
• Dividend Yield

Main Approaches to Equity Valuation and EV Valuation