The table below lists the Enterprise Multiples (EV/EBITDA) by GICS sector. The multiples are calculated using the current and past S&P 500 companies. Comparing the current enterprise multiple of a sector/industry to its historical average value can be used to estimate if the sector is currently undervalued or overvalued. Note: The ratio is not available for the financials sector as EBITDA is not a meaningful item for financial companies.
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S&P 500 – EV/EBITDA Multiple by GICS Sector
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For comprehensive data, subscribe to S&P 500 Sector/Industry Valuation Researcher Dataset by Siblis Research that provides the full raw data used to calculate the valuation ratios, including share prices, market caps, earnings, enterprise values, EBITDAs, free cash flows and historical GICS Sector/Industry classifications all current and past S&P 500 companies. Annual sector performance data is included. Check a sample file from here.
How the EV/EBITDA multiple by sector is calculated?
The EBITDA multiple for a specific sector is calculated by dividing the total enterprise value of all sector companies by the total sum of annual EBITDA of the companies. The multiples on the table above are trailing twelve months, meaning the last four quarters are used when earnings before interest, taxes, depreciation and amortization are calculated.
Using EV/EBITDA to value companies
Enterprise value to EBITDA is a popular multiple that is used to measure the value of a corporation. The ratio can be seen as a capital structure-neutral alternative for Price/Earnings ratio. When valuations of different companies are compared to each other, the enterprise multiple is often considered more suitable than P/E. Using P/E ratio for comparative analysis can be misleading due to different amounts of leverage, different accounting practices related to depreciation and different tax rates.
The multiple is most commonly used to evaluate industrial and consumer industries. It is more rare to use the ratio for financial or energy companies. For oil & gas companies, there are various industry specific valuation multiples like EV to Reserves, EV to Production and EV to Capacity. Banks and insurance companies are most commonly evaluated using price-to-book ratio.