Because both sides of the ratio are pre-interest and pre-tax, EV/EBITDA compares operating businesses rather than financing decisions. It is the default multiple in private equity, credit analysis and most industrial coverage.
Its blind spot is capital intensity. A business needing to spend 15% of revenue on capex and one needing 3% can trade at identical EV/EBITDA and have completely different cash economics, which is why ev-ebit or a cash-flow multiple is the better cross-check.
Example: Northwind Tools has an enterprise value of $2.86B and $195M of EBITDA, 14.7 times. On adjusted-ebitda of $238M it is 12.0 times, and the gap is mostly stock-based pay.
Related: ebitda, market-cap-versus-enterprise-value, ev-ebit, adjusted-ebitda, net-debt-to-ebitda