EV/EBIT – EBIT Multiple

The EV/EBIT multiple divides enterprise value by operating profit (Earnings Before Interest and Taxes — EBIT). It is an intermediate multiple between EV/EBITDA and the P/E ratio: it incorporates the impact of depreciation and amortisation (unlike EBITDA) but remains independent of capital structure and taxation (unlike P/E). It is particularly relevant for capital-intensive companies where depreciation reflects a genuine economic cost.

EV/EBIT is preferable to EV/EBITDA when comparable companies have very different depreciation policies, D&A is high and represents a real economic cost (heavy industry, precision equipment), or maintenance capex closely tracks depreciation charges. In these cases EBITDA overstates true earnings capacity and EV/EBIT is a more conservative and accurate indicator.

Example: a Swiss industrial SME shows EBITDA of CHF 2.8 million and EBIT of CHF 1.9 million (CHF 900,000 depreciation — high capital intensity). Sector multiples: EV/EBITDA median 6.5x → EV = CHF 18.2M. EV/EBIT median 9.0x → EV = CHF 17.1M. The convergence of both approaches validates an EV of CHF 17.5–18.0 million.

At Hectelion, we select the most relevant multiple (EV/EBITDA vs EV/EBIT) based on the investment profile and cost structure of the valued company.