Enterprise value (EV) is a cleaner comparison metric than market cap because it accounts for capital structure. A company with high cash and low debt has a lower EV than its market cap; the reverse is true for debt-heavy firms.
EV pairs naturally with EBITDA to form EV/EBITDA — a valuation ratio used across capital structures and geographies.
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Open Decision Lab →Frequently asked questions
Why use EV/EBITDA instead of P/E?
It's less distorted by different tax jurisdictions, financing choices, and depreciation policies — useful for cross-border and cross-industry comparisons.