equity: EV (enterprise value) why, higher, equity

svgleeson

for EV/EBIDTA, why the higher, the stock might be more undervalued? text book volumn 4, page 561, Q 13, why RGI is more undervalued than NCI:
for NCI:
P/EBIDTA=10
EV/EBITDA=14.9

RGI:
P/EBITDA=12
EV/EBITDA=12.72

Thanks.

wizofoz

When using EBITDA for comparison; EV is a better measure than price because EV incoporates the value of debt & equty (price is just equity), and since EBITDA is cash flow nrfore both debt & Equity holders are paid, EV should be used as opposed to price.

The higher calculated multiple suggests that the EV is too high and thus over valued.