What Does TTM EV/EBITDA Mean?
TTM EV/EBITDA is a financial metric often used by buyers to assess the reasonability of a target’s valuation. It is actually a combination of the following three terms:
- “TTM” — Trailing twelve months;
- “EV” — Enterprise value; and
- “EBITDA” — Earnings before income taxes, depreciation, and amortization
When buyers value a company, they may use different valuation approaches such as the discounted cash flow or income approach to compute enterprise value. Once EV is calculated, it is then compared to the EBITDA that the target has achieved over the last twelve months to compute the TTM EV/EBITDA. This calculation is usually presented as a multiple (i.e., 3x or 4x) and is compared against other industry or transaction benchmarks to ensure it is a reasonable number.