What is the primary reason for not using Equity Value / EBITDA as a valuation multiple?

The primary reason for not using Equity Value / EBITDA as a valuation multiple is that Equity Value represents only equity investors, which can create a misleading picture when evaluating a company's overall financial performance. Since EBITDA reflects the earnings before interest, taxes, depreciation, and amortization, it is a measure of operating performance that applies to the entire company, including both equity and debt holders.

Valuation multiples are most useful when applied consistently, and using Equity Value does not provide a comprehensive view of the company's value in relation to its earnings when it comes to total capital structure. A more appropriate multiple would either include enterprise value, which accounts for total capital (debt and equity), or be focused solely on equity metrics in relation to equity earnings metrics. This ensures that the analysis includes all stakeholders' perspectives, thereby providing a clearer assessment of corporate performance.