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Nvidia
Estimated Fair Value$354.32
Current Price$229.28
Valuation Gap54.5%
Historical Median EV/EBIT36.98x
Current EV/EBIT23.84x
Enterprise Value-to-EBIT (EV/EBIT)
For informational and educational purposes only • Not investment advice.
Compare EV/EBIT valuations across companies
Apple
Estimated Fair Value$235.90
Current Price$336.64
Valuation Gap-29.9%
Historical Median EV/EBIT22.36x
Current EV/EBIT31.85x
Alphabet
Estimated Fair Value$491.68
Current Price$351.66
Valuation Gap39.8%
Historical Median EV/EBIT19.41x
Current EV/EBIT13.76x
Microsoft
Estimated Fair Value$584.13
Current Price$535.07
Valuation Gap9.2%
Historical Median EV/EBIT25.56x
Current EV/EBIT23.40x
Selected EV/EBIT Multiple
What is Enterprise Value-to-EBIT (EV/EBIT) Valuation?
Enterprise Value-to-EBIT (EV/EBIT) Valuation estimates a company's Fair Value based on its EBIT and the EV/EBIT multiple applied to that EBIT.
The EV/EBIT ratio compares a company's Enterprise Value with its EBIT. It shows how the market values the company's operating profit before interest and taxes.
Historical EV/EBIT multiples show the valuation levels at which the company's operating business has traded in the past. They can be used as a reference for estimating Fair Enterprise Value from current EBIT.
EV/EBIT Valuation is most useful for companies with positive and relatively stable EBIT, but it may be less reliable when operating profit is highly cyclical or changes materially over time.
How the EV/EBIT Model Works
The EV/EBIT model estimates fair value by calculating the company's historical EV/EBIT multiples, selecting a valuation multiple, applying it to EBIT, and converting Enterprise Value into equity value per share.
Historical
EBIT & Enterprise Value
→
Calculate Historical
EV/EBIT
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Select
Valuation EV/EBIT
→
Estimate Fair
Enterprise Value
→
Fair Value
per Share
EV/EBIT Formula
Key Model Assumptions
• The company must have positive EBIT.
• EBIT is based on trailing twelve-month (TTM) operating results when four consecutive quarterly periods are available; otherwise, the latest annual EBIT is used.
• Historical EV/EBIT multiples require valid EBIT, market value and balance sheet data.
• The 10 most recent valid historical EV/EBIT multiples are used to estimate the company's typical valuation multiple.
• The historical median EV/EBIT forms the Base valuation assumption.
• Conservative and optimistic scenarios adjust the historical median EV/EBIT.
• Historical EV/EBIT multiples may not remain representative if the company's profitability, capital structure or operating performance changes materially.
• EBIT is based on trailing twelve-month (TTM) operating results when four consecutive quarterly periods are available; otherwise, the latest annual EBIT is used.
• Historical EV/EBIT multiples require valid EBIT, market value and balance sheet data.
• The 10 most recent valid historical EV/EBIT multiples are used to estimate the company's typical valuation multiple.
• The historical median EV/EBIT forms the Base valuation assumption.
• Conservative and optimistic scenarios adjust the historical median EV/EBIT.
• Historical EV/EBIT multiples may not remain representative if the company's profitability, capital structure or operating performance changes materially.
Step 1 — Calculate Historical EV/EBIT Multiples
Historical Enterprise Value = Historical Market Cap + Historical Net Debt
Historical EV/EBIT = Historical Enterprise Value / Historical EBIT
Historical Median EV/EBIT = Median of the 10 most recent valid historical EV/EBIT multiples
Historical EV/EBIT = Historical Enterprise Value / Historical EBIT
Historical Median EV/EBIT = Median of the 10 most recent valid historical EV/EBIT multiples
The model calculates historical Enterprise Value and historical EV/EBIT multiples. The median of the 10 most recent valid EV/EBIT multiples is then used as the company's historical valuation benchmark.
Step 2 — Select the Valuation Multiple
Selected EV/EBIT = Historical Median EV/EBIT × Scenario Adjustment
The selected scenario adjusts the historical median EV/EBIT to determine the valuation multiple used to estimate Fair Value.
Step 3 — Estimate Fair Value per Share
Fair Enterprise Value = Current EBIT × Selected EV/EBIT
Fair Equity Value = Fair Enterprise Value − Net Debt
Fair Value per Share = Fair Equity Value / Shares Outstanding
Fair Equity Value = Fair Enterprise Value − Net Debt
Fair Value per Share = Fair Equity Value / Shares Outstanding
The selected EV/EBIT multiple is applied to current EBIT to estimate Fair Enterprise Value. Net Debt is then subtracted, or Net Cash is added, to determine Fair Equity Value. The resulting equity value is divided by Shares Outstanding to estimate Fair Value per Share.
Step 4 — Compare With the Current Market Valuation
Current Enterprise Value = Current Market Cap + Current Net Debt
Current EV/EBIT = Current Enterprise Value / Current EBIT
Valuation Gap = Fair Value per Share / Current Price − 1
Current EV/EBIT = Current Enterprise Value / Current EBIT
Valuation Gap = Fair Value per Share / Current Price − 1
Current EV/EBIT shows the multiple currently assigned to the company's EBIT, while the Valuation Gap compares the estimated Fair Value with the current stock price.