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EBITDA multiple for many companies is in the 5-15x range, while PE is typically higher than that (15x+). They are both essentially measuring the same thing - how much in profit you are getting for what you pay for the company - but EPS tends to be lower relatively to the price because it includes interest, taxes, depreciation and amortization, stock-based comp (sometimes...) etc.
The numbers I quoted above are very industry and market-dependent, but generally PE is higher than EBITDA multiples.
I basically agree with dosk, but just a reminder - for interviews and elsewhere, it's important to distinguish that EBITDA multiples are generally used for enterprise value (basically whole firm minus cash), whereas with P/E, you're talking about equity value, not the whole firm.
If I were asked this in an interview, I would say this: EBITDA is (more or less) cash flow to the firm, and accounting earnings are (more or less) cash flow to equity. Unless you have a debt free firm, you would never value the enterprise the same as the equity. This is because, if a firm has debt, the cost of debt (and the return on debt) is always lower than the cost of equity. So as an investor, you generally pay less for "whole firm" cash flows - which is a weighted average of debt and equity cash flows - and you would generally pay more for pure equity cash flows.
Of course there's more to it, and at this point I'd expect the interviewer to challenge something and continue the conversation from there.
Restructure This: I don't think I've ever heard someone describe accounting earnings as "more or less cash flow to equity." While I see what you are trying to say in terms of the relationship between earnings and shareholders' equity, deviations between accounting earnings and free cash flow to equity holders can be very significant. While accounting earnings are a useful metric, I personally would avoid describing them as an approximation of cash flows in an interview.
I think Restructure This was more broadly referring to the idea that net income is a key contributor to the accretion or dilution of shareholders equity. While net income is certainly not a key determinant of cash flow to equity, it is an excellent proxy for earnings to equity.
Fully agree that net income is not cash flow, and neither is EBITDA. Yet everyone in the industry treats them as such (more or less) - otherwise, they make no sense to value anything.
You could actually make an argument that accounting earnings CAN BE a better estimate of future cash flow to equity than the actual measured cash flow to equity. Lots of caveats of course, but that would be another discussion.
In context however - this was an attempt to explain why EV/EBITDA is generally lower than StockPrice/EPS. I stand behind my overall reasoning -- it comes down to the distinction between whole firm value and equity value, and return on total capital (including debt) versus return on equity.
Are the ratios themselves inherently poor measures of cash flow and valuation? Absolutely. But the question wasn't whether they ratios are good, the question is which is higher and why.
I would welcome a better explanation though - maybe using the word "cash flow" goes in the wrong direction.
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