EBIT/Enterprise Value (EBIT/EV)
factor.formula
It is calculated as earnings before interest and taxes (EBIT) divided by enterprise value (EV).
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Earnings Before Interest and Taxes refers to the profit of a company before paying interest and income tax. It reflects the profitability of a company's core operating activities, excluding the impact of capital structure and tax policies on profits. The calculation of EBIT usually starts with operating profit, but may differ slightly under different accounting standards.
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Enterprise Value refers to the overall value of an enterprise, including equity value and debt value. EV is usually calculated as: market value + total liabilities - cash and cash equivalents. It can more comprehensively reflect the overall value of an enterprise because it can take into account both equity value and debt value.
factor.explanation
The higher the EBIT/EV ratio, the stronger the company's ability to generate profits using its total capital, and the higher the possibility that its value is underestimated. This indicator can be used to measure the value creation efficiency of different industries or companies, but it should be noted that there may be significant differences between different industries, so it is more meaningful to compare the same industry. At the same time, EBIT/EV should also be evaluated in combination with other financial indicators and market environment to avoid one-sided interpretation.