Use cases of EV/EBITDA and EV/EBIT
I currently ask myself, under which scenarios I would either use EV/EBITDA or EV/EBIT, as I came across different sources online and everyone seems to say something different.
To my understanding, EV/EBIT is best used for industrial companies, as they are Capex intensive and therefore have high depreciation on their income statement. Accounting for depreciation gives a better picture of the profitability of those companies as D&A here is true economic cost, rather than using EBITDA, which would make comparability wishy washy.
On the other hand, I am aware that depreciation can undergo very different account policies in different jurisdictions. Therefore EBITDA may be a better tool of comparability as it eliminates this issue.
Could you guys give me some clarity on whether I am wrong or not, and when you should prioritize either accounting for depreciation, and accounting for different account policies.
Thank you guys very much in advance!
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