Enterprise value to EBITDA (earnings before interest, taxes depreciation, and amortization) is one of the most commonly used valuation ratios. According to a 2015 paper, almost 80% of equity analysts use some form of EV/EBITDA in their analysis. Only the price to earnings (P/E) ratio is more widely used.
Unfortunately, EV/EBITDA has many flaws that can make it misleading. The ratio ignores real costs and liabilities, fails to account for companies with differing tax rates, and misses important distinctions between business models. Investors that rely on EV/EBITDA - and companies like ADT (ADT