Question

What is the difference between the enterprise value to EBITDA ratio and the PE ratio

Answer 1

EV / EBITDA is a ratio which combines both market value of debt and equity of the firm as measured by EV with operating income measured by EBITDA. Here, the capital structure (debt/equity ratio) is not much relevant and its impact is not considered.

PE ratio = Stock Price / Earnings per share (EPS) is only focused on market value of equity with net profit of the firm which is the bottom line of the profit loss statement. Capital structure would impact the bottom line and the stock price as well.