Enterprise value to EBIT ratio

What is Enterprise value to EBIT ratio?

This ratio allows you to evaluate a company's ability to make profit in comparison with the market, taking into account its Balance Sheet.

Formula:

Enterprise value / EBIT

What does Enterprise value to EBIT ratio mean?

This ratio can be considered an improved version of Price to earnings ratio, because it contains a larger number of company parameters, especially in industries where companies have large amounts of debt.

A high ratio indicates that the company's shares are overvalued, and a low one may indicate their undervaluation. Often, a lower indicator indicates that the company is financially stable and has fewer risks.