Enterprise Multiple is a ratio used to determine the value of a company, It takes debt into account, in contrast to other multiples (like P/E for example) that doesn't.
Enterprise multiple is calculated by the following formula:
Enterprise multiple = Enterprise Value / EBITDA
Enterprise multiple is an effective way to value and compare transnational companies, because it ignores effects of countries' taxations rules. In addition, since it considers company's debt, it is a better metric than the market capitalization and is often used to find possible takeover candidates.
Like many other metrics, enterprise multiple should be used to compare companies from the same industry.
A low ratio refers to a company that is undervalued and a good takeover candidate.
