EBITDA per Share

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What is EBITDA per Share?

EBITDA per Share measures the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) divided by the number of outstanding shares, providing a per-share view of operating performance.

How do you interpret EBITDA per Share?

EBITDA per Share reflects the operational cash flow per share, excluding non-operational factors, and is useful for comparing companies' operational performance.

How to Calculate EBITDA per Share?

EBITDA per Share is calculated by dividing the total EBITDA by the weighted average number of outstanding shares during the period.

EBITDA per Share = EBITDA / Weighted Average Shares Outstanding

where

• EBITDA is the company’s earnings before interest, taxes, depreciation, and amortization.
• Weighted Average Shares Outstanding is the average number of shares during the period, adjusted for stock splits or issuances.

Why is EBITDA per Share important?

EBITDA per Share isolates the operational earnings of a company on a per-share basis, making it a useful metric for evaluating the core profitability of the business. It removes the effects of capital structure, taxes, and non-operational expenses, which can make it easier to compare operational performance across companies.

How does EBITDA per Share benefit investors?

Investors use EBITDA per Share to assess how efficiently a company is generating operational earnings per share, independent of its capital structure. This allows for a more direct comparison of operational performance across companies with different financing and tax situations.

Using EBITDA per Share to Evaluate Stock Performance

Investors can use EBITDA per Share to evaluate whether a company is improving its operational performance over time. A rising EBITDA per Share can signal better operational efficiency, which can lead to improved stock performance. It is especially useful in industries with high levels of capital investment or varying tax burdens.

FAQ about EBITDA per Share

What is a Good EBITDA per Share?

A "good" EBITDA per Share depends on the industry. Generally, higher values indicate stronger operational performance, but comparisons should be made against industry peers to determine what is considered a good level.

What Is the Difference Between Metric 1 and Metric 2?

EBITDA per Share measures operational earnings before interest, taxes, depreciation, and amortization, whereas EPS measures net income after all expenses, including taxes and interest. EBITDA per Share focuses on the company’s core operations, while EPS reflects the overall profitability.

Is it bad to have a negative EBITDA per Share?

A low EBITDA per Share could indicate that the company is not generating sufficient operational earnings relative to its number of shares. However, this must be interpreted in the context of the company's industry and financial structure.

What Causes EBITDA per Share to Increase?

EBITDA per Share increases when a company grows its EBITDA (operational earnings) or reduces the number of outstanding shares, often through buybacks.

What are the Limitations of EBITDA per Share?

It does not account for the impact of interest, taxes, depreciation, or amortization, which are crucial for overall profitability. It may not fully capture cash flow or financial sustainability.

When should I not use EBITDA per Share?

EBITDA per Share may be less useful in industries where interest, taxes, and capital expenses are significant determinants of overall profitability, as it ignores these factors.

How does EBITDA per Share compare across industries?

Industries that rely heavily on capital expenditures or have high levels of debt may have lower EBITDA per Share. Comparisons across industries should consider the capital intensity and financing structures of the businesses.

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