EV multiples: what the metrics mean
Multiples based on the value of the whole business: EV is market cap plus net debt. They do not depend on how a company is financed and are comparable across companies with different debt.
EV / Sales (TTM) — business value to sales
How many years of sales the whole business, debt included, is valued at. The main measure where there are no earnings yet at all — young tech and biotech companies. Comparable only within a sector: retail with a 3% margin and software with an 80% margin have incomparable norms.
EV / Sales (FWD) — the same, to estimated sales
Business value divided by the sales expected next year. The faster a company grows, the further this multiple falls below the TTM version.
EV / EBITDA (TTM) — value to earnings before depreciation
What the business is worth in EBITDA — earnings before interest, taxes, depreciation and amortization. The standard of M&A deals: it depends neither on the debt structure, nor on the tax jurisdiction, nor on how fast the company writes off its equipment.
In detail, with an example →EV / EBITDA (FWD) — the forward version
The same to next year's consensus EBITDA. If it is well below TTM, the market has already priced in operating earnings growth.
In detail, with an example →EV / EBIT (TTM) — value to operating earnings
The same as EV / EBITDA, but with depreciation subtracted. Stricter on capital-heavy businesses: a factory or a tower network really has to renew its equipment, and pretending that cost does not exist is not an option.
EV / EBIT (FWD) — the forward version
Business value to next year's operating earnings by analyst consensus.