BAR Valuation · Updated November 2026
EV/EBITDA or P/E: Why Can't You Mix the Numerators and Denominators?
Valuation multiples work only when numerator and denominator belong to the same capital-provider perspective.
EV/EBITDA
Enterprise value belongs broadly to debt and equity capital providers, while EBITDA is measured before interest expense, making the pairing conceptually consistent.
P/E
Price or equity value belongs to equity holders, while net income is after interest and belongs to equity holders.
Capital structure
EV-based multiples can be useful when comparing businesses with different financing structures.
Do not mix
Enterprise value divided by net income or equity value divided by EBITDA can mismatch capital-provider perspectives.
The takeaway
Enterprise metrics pair with pre-financing operating metrics. Equity metrics pair with after-financing equity metrics.
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FAQ
Is P/E an equity multiple?
Yes.
Is EV/EBITDA an enterprise multiple?
Yes.
Does a higher multiple automatically mean a better company?
No.