Multiples question

Got this question in an interview the other day

Company has EV/Sales of 2x and EBITDA margin of 10%. What is EV/EBITDA multiple? 

Anyone? 

WSO Elite Modeling Package

  • 6 courses to mastery: Excel, Financial Statement, LBO, M&A, Valuation and DCF
  • Elite instructors from top BB investment banks and private equity megafunds
  • Includes Company DB + Video Library Access (1 year)

Comments (10)

  • Intern in IB - Gen
Aug 19, 2020 - 12:50pm

20x

Sales = 10 * EBITDA

EV/Sales = EV/(10*EBITDA)

10* EV/Sales = EV/EBITDA

Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
Most Helpful
Aug 19, 2020 - 1:06pm

Great question:

Step 1: Assume EBITDA is $2 million -> $2 million / 10% EBITDA Margin = $20 million Sales

Step 2: $20 million Sales * 2x EV/Sales multiple = $40 million EV

Step 3: $40 million EV / $2 million EBITDA = 20x EV/EBITDA multiple

Hope this makes sense for future references

Aug 19, 2020 - 1:07pm

You can (and probably should) always plug in numbers in these questions. 

Assume $100 EV, which tells you $50 of sales (2x EV / Sales). 

$50 of sales at 10% EBITDA margins means $5 of EBITDA

$100 EV / $5 EBITDA is 20x. 

Start Discussion

Total Avg Compensation

June 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (35) $364
  • Associates (202) $234
  • 2nd Year Analyst (114) $151
  • Intern/Summer Associate (97) $145
  • 3rd+ Year Analyst (27) $145
  • 1st Year Analyst (419) $131
  • Intern/Summer Analyst (337) $82