--- title: EV/EBITDA multiple in valuing capital-intensive companies description: The EV/EBITDA multiple evaluates enterprise value against operating cash flow, neutralizing leverage and depreciation in capital-intensive sectors in 2026. url: https://ginity.vn/en/blog/ev-ebitda-multiple-valuing-capital-intensive-companies canonical: https://ginity.vn/en/blog/ev-ebitda-multiple-valuing-capital-intensive-companies markdown: https://ginity.vn/en/blog/ev-ebitda-multiple-valuing-capital-intensive-companies.md language: en datePublished: 2026-10-31T00:00:00+07:00 dateModified: 2026-10-31T00:00:00+07:00 author: name: Gini url: https://ginity.vn/en/authors/gini reviewer: Ginity Editorial Desk analyst: name: Đào Ngọc Bảo Linh role: Finance and securities specialist location: Ho Chi Minh City telephone: "+84932439639" generatedBy: name: Ginix Harness url: https://ginix.vn desk: id: learn name: Learn investing url: https://ginity.vn/en/learn tickers: - REE sources: [] publisher: Ginity attribution: 'Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content.' disclaimer: "Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources." usageTerms: https://ginity.vn/ai.txt --- # EV/EBITDA multiple in valuing capital-intensive companies > The EV/EBITDA multiple evaluates enterprise value against operating cash flow, neutralizing leverage and depreciation in capital-intensive sectors in 2026. Gini · Learn investing · 2026-10-31 · https://ginity.vn/en/blog/ev-ebitda-multiple-valuing-capital-intensive-companies _Lead analyst: Đào Ngọc Bảo Linh · Finance and securities specialist · Ho Chi Minh City · 0932 439 639_ ## Key takeaways - The EV/EBITDA multiple measures total enterprise value against operating cash flow before interest, taxes, and depreciation in 2026. - The metric neutralizes 2 major distortions: capital structure differences and accounting depreciation policies across heavy manufacturing companies. - In a hypothetical 2026 example, a business with 32,000 billion VND in EV and 5,000 billion VND in EBITDA trades at 6.4x. - The method faces 2 primary limitations: ignoring ongoing maintenance capital expenditure (CapEx) and working capital swings. When valuing equity in industrial manufacturing, power generation, cement, or telecommunications, analysts frequently encounter analytical limits with the standard price-to-earnings (P/E) ratio. Heavy industry enterprises hold substantial equipment and factory infrastructure, producing heavy accounting depreciation charges each year. At the same time, large facility expansions require considerable commercial debt financing, leading to substantial interest expenses on the income statement. Third-quarter economic growth reached an estimated 9.95% in 2026 on robust manufacturing activity and infrastructure disbursement, according to official figures reported by [Government News](https://baochinhphu.vn/tang-truong-gdp-quy-iii-uoc-dat-995-102261003093529694.htm). During major capacity expansions, the EV/EBITDA multiple provides a dependable benchmark to evaluate operational earnings power without distortions from funding structures or accounting depreciation choices. ## What EV/EBITDA measures and why it matters In corporate valuation, the EV/EBITDA multiple is a financial ratio comparing enterprise value (EV) with earnings before interest, taxes, depreciation, and amortization (EBITDA). The multiple shows how many units of enterprise value an investor pays for each unit of operating cash flow generated before debt service and taxes. While equity market capitalization reflects only the value belonging to common shareholders, enterprise value accounts for claims held by creditors as well. Meanwhile, EBITDA highlights operational cash created by productive assets before capital providers claim their returns through interest, corporate taxes, or depreciation write-downs. The EV/EBITDA multiple is frequently used to assess industry peers operating with different financial leverage levels according to educational materials from [CFA Institute](https://www.cfainstitute.org/insights/professional-learning/refresher-readings/2026/market-based-valuation-price-enterprise-value-multiples). ## How to calculate enterprise value and EBITDA To calculate this valuation multiple accurately, analysts separate the calculation into enterprise value in the numerator and operational cash generation (EBITDA) in the denominator. Enterprise value measures the complete economic worth of an ongoing enterprise. In theoretical terms, if a buyer purchases an entire business, they pay for all outstanding shares at market price, assume existing debt obligations, and gain ownership of unused cash balances held in company accounts. The mathematical formulation for enterprise value is defined as follows: $$\text{Enterprise Value (EV)} = \text{Market Capitalization} + \text{Total Debt} - \text{Cash and Cash Equivalents}$$ In this formula, market capitalization equals total outstanding common shares multiplied by the prevailing market price. Total debt includes both short-term bank borrowings and long-term interest-bearing loans. Cash balances are deducted because a buyer could immediately use liquid funds to settle outstanding borrowing obligations. The second core component is EBITDA, representing cash generation from operations before non-cash accounting charges and financing costs: $$\text{EBITDA} = \text{Pre-Tax Profit} + \text{Interest Expense} + \text{Depreciation Expense}$$ With both building blocks computed, the resulting valuation multiple is derived through division: $$\text{EV/EBITDA Multiple} = \frac{\text{Enterprise Value (EV)}}{\text{EBITDA}}$$ A lower ratio indicates that an enterprise trades at a cheaper level relative to operating cash flows generated across its operational asset base. ## Why capital-heavy sectors rely on EV/EBITDA In equity research, the standard P/E ratio functions well for asset-light businesses in retail, banking, or digital services. However, in capital-intensive industries such as power utilities, basic materials, maritime transport, and heavy manufacturing, the EV/EBITDA multiple offers a clearer picture due to two practical advantages. First, it eliminates distortions caused by accounting depreciation schedules. Industrial firms allocate heavy capital outlays to machinery, furnaces, and production plants. Fixed asset depreciation frameworks permit enterprises to select appropriate accounting methods as confirmed in [Decision 1760/QD-BTC announcing Circular 45/2013/TT-BTC remains effective](https://vanban.chinhphu.vn/?docid=218751&pageid=27160) issued by the Ministry of Finance. An enterprise selecting accelerated depreciation records heavy charges in early years, depressing reported net profit and inflating the P/E ratio. Conversely, a firm using extended straight-line schedules reports higher accounting net income. Adding back depreciation through EBITDA levels the playing field across different depreciation methods. Second, the metric neutralizes differences in balance sheet borrowing structures. Consider two manufacturing plants that generate identical revenue and operating capacity but choose distinct funding paths. For illustration, Company A finances 70% of its asset base with bank borrowings, whereas Company B funds 100% through equity contributions (source: comparative model). Company A carries substantial interest expenses that depress net profit, making its P/E multiple appear costly. EV/EBITDA looks at total enterprise worth and cash flow before interest expense, enabling analysts to evaluate core asset efficiency without distortion from management financing decisions. In October 2026, the VN-Index traded around a price-to-earnings multiple of 12x according to market observations from [CafeF](https://cafef.vn/dinh-gia-re-so-voi-lich-su-chua-du-khi-nao-dong-tien-quay-lai-18826101217392629.chn). In this valuation environment, examining enterprise cash flows through EV/EBITDA provides a clearer perspective on operating asset power across industrial sectors. ## Comparing EV/EBITDA and price-to-earnings multiples Comparing these two ratios highlights key functional differences across balance sheet and operating metrics: | Comparison criteria | EV/EBITDA multiple | P/E multiple | | :--- | :--- | :--- | | Measurement scope | Entire firm (equity holders and creditors) | Common equity shareholders only | | Debt structure | Neutralizes interest expense and capital structure | Directly influenced by financial debt leverage | | Depreciation policy | Excludes accounting depreciation charges | Directly impacted by depreciation write-downs | | Sector fit | Capital-intensive: power, steel, infrastructure | Asset-light: banking, software, consumer retail | | International comparability | High comparability across tax regimes and rules | Lower comparability due to varied local tax rates | ## A practical valuation example for 2026 Refrigeration Electrical Engineering Corporation (REE) set a 2026 net profit target exceeding 2.8 trillion VND, as reported in corporate disclosures on [Vietstock](https://vietstock.vn/2026/03/ree-len-ke-hoach-lai-rong-2026-vuot-28-ngan-ty-dong-luc-chinh-tu-mang-bat-dong-san-737-1413891.htm). To demonstrate how the valuation process works for a company with substantial physical assets, consider a detailed framework through a hypothetical example. In this hypothetical example for a mid-sized industrial producer in 2026, the company has 500 million outstanding shares trading at 50,000 VND per share. Market capitalization stands at 25,000 billion VND (500 million shares multiplied by 50,000 VND), per our calculation. Total short-term and long-term interest-bearing debt in the example totals 10,000 billion VND, while cash and bank deposits equal 3,000 billion VND. Consequently, the company carries net debt of 7,000 billion VND (10,000 billion VND minus 3,000 billion VND), per our calculation. Enterprise value (EV) in the example reaches 32,000 billion VND, per our calculation: $$\text{EV} = 25{,}000 + 10{,}000 - 3{,}000 = 32{,}000\text{ billion VND}$$ On the operating side, the company produces 3,200 billion VND in pre-tax earnings. Financing costs generate 600 billion VND in interest expense, while depreciation of manufacturing facilities and equipment totals 1,200 billion VND, per our calculation. Operating EBITDA is computed as: $$\text{EBITDA} = 3{,}200 + 600 + 1{,}200 = 5{,}000\text{ billion VND}$$ Combining these metrics produces the valuation multiple: $$\text{EV/EBITDA Multiple} = \frac{32{,}000}{5{,}000} = 6.4\text{x}$$ ```chart { "preset": "sector-columns", "label": "Enterprise value composition in the 2026 example", "caption": "Market capitalization accounts for 78.1% and net debt represents 21.9% of total EV. Source: Ginity calculations.", "locale": "en", "params": { "values": [78.1, 21.9], "labels": ["Market Capitalization", "Net Debt"], "unit": "%", "highlight": 0 } } ``` ## Key limitations of the EV/EBITDA multiple Although EV/EBITDA serves as an effective analytical tool for capital-intensive sectors, it cannot replace comprehensive free cash flow modeling. Two major analytical constraints warrant careful attention. First, the ratio ignores ongoing capital expenditure (CapEx). While EBITDA adds back non-cash depreciation, industrial equipment experiences continuous physical wear. To sustain commercial competitiveness and production capacity, enterprises must expend cash on replacement machinery and plant overhauls. For instance, if a company delivers 5,000 billion VND in EBITDA but must spend 4,500 billion VND on annual maintenance CapEx, actual discretionary cash available for distribution is only 500 billion VND (source: operational model). Relying solely on EBITDA in such situations yields an overly optimistic appraisal of financial sustainability. Second, EBITDA excludes fluctuations in working capital requirements. Rapidly growing manufacturing firms routinely commit cash to raw material inventories and customer receivables. When cash is absorbed by inventories and receivables, real operational cash generation can turn negative even while accounting EBITDA displays healthy positive figures. In addition, evaluating EV/EBITDA alongside other credit metrics provides a more complete assessment. Analysts frequently combine the multiple with the net debt to EBITDA ratio to gauge how many years of operational cash generation would be required to clear outstanding borrowings. ## Sources - Ministry of Finance: [Decision 1760/QD-BTC announcing Circular 45/2013/TT-BTC remains effective](https://vanban.chinhphu.vn/?docid=218751&pageid=27160). - Government News: [Third quarter GDP growth estimated at 9.95%](https://baochinhphu.vn/tang-truong-gdp-quy-iii-uoc-dat-995-102261003093529694.htm) (03/10/2026). - CFA Institute: [Market-Based Valuation: Price and Enterprise Value Multiples](https://www.cfainstitute.org/insights/professional-learning/refresher-readings/2026/market-based-valuation-price-enterprise-value-multiples) (2026). - CafeF: [Low valuation relative to history is not enough, when will money return?](https://cafef.vn/dinh-gia-re-so-voi-lich-su-chua-du-khi-nao-dong-tien-quay-lai-18826101217392629.chn) (13/10/2026). - Vietstock: [REE plans 2026 net profit exceeding 2.8 trillion VND](https://vietstock.vn/2026/03/ree-len-ke-hoach-lai-rong-2026-vuot-28-ngan-ty-dong-luc-chinh-tu-mang-bat-dong-san-737-1413891.htm) (19/03/2026). --- _Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content._ _Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources._