Valuation benchmark · 20 industries
EV/EBIT Ratio by Industry: 2024 Sector Benchmarks
EV/EBIT multiples range from 9x in Energy to 32x in Software. This table shows the median multiple, typical range, and the key driver across 20 industries — so you can instantly benchmark any stock against its industry peers on an operating earnings basis. EV/EBIT is more conservative than EV/EBITDA because it deducts depreciation and amortization, reflecting real asset wear in capital-intensive businesses. For a live multiple comparison, use the EV/EBIT Calculator or read the EV/EBITDA guide for a deeper look at enterprise value multiples.
2024 data · 20 industries
EV/EBIT Medians by Industry
| Industry | Median EV/EBIT | Typical Range | Key Driver |
|---|---|---|---|
| Software | 32x | 25x – 45x | Recurring revenue, high incremental margins |
| Semiconductors | 22x | 18x – 28x | Cyclical; multiples expand at cycle trough |
| Technology (Diversified) | 22x | 16x – 30x | Hardware + services mix |
| Biotech / Life Sciences | 40x | 28x – 60x | Pipeline premium; many pre-profit |
| Healthcare | 20x | 16x – 26x | Defensive, regulated pricing |
| Pharmaceuticals | 22x | 16x – 30x | Patent cliff risk priced in |
| Consumer Staples | 17x | 14x – 22x | Stable cash flows, low growth |
| Food & Beverage | 17x | 14x – 22x | Brand-driven, steady volume |
| Consumer Discretionary | 15x | 12x – 20x | Cyclical demand, rate-sensitive |
| Retail | 11x | 8x – 14x | Thin margins, e-commerce pressure |
| Industrials | 15x | 12x – 18x | Capital-intensive, order-book driven |
| Aerospace & Defense | 17x | 14x – 22x | Long-cycle government contracts |
| Transportation | 13x | 10x – 16x | Asset-heavy, fuel-cost sensitive |
| Communication Services | 17x | 13x – 22x | Infrastructure + media blend |
| Media & Entertainment | 15x | 11x – 20x | Hits-driven; streaming transition underway |
| Utilities | 16x | 12x – 20x | Regulated; bond-like pricing |
| Real Estate (Non-REIT) | 22x | 16x – 30x | Asset appreciation + development pipeline |
| Energy | 9x | 6x – 12x | Commodity cyclicality compresses multiples at cycle peak |
| Materials | 11x | 8x – 14x | Commodity-linked earnings volatility |
| Financial Services (Non-Bank) | 14x | 10x – 18x | P/E often preferred; shown for reference |
How to Use EV/EBIT Sector Benchmarks
Enterprise value to EBIT (EV/EBIT) is a capital-structure-neutral valuation multiple that captures operating earnings after the real cost of asset depreciation. Unlike EV/EBITDA, it does not add back depreciation and amortization — making it more appropriate for businesses where physical assets genuinely wear out and must be replaced. A pipeline company or a manufacturer that ignores D&A is overstating its true earnings power.
Step 1: Find the right row. Identify which industry classification your company belongs to from the table above. The right row matters because medians vary more than 3x across the 20 industries here. A software company at 18x looks cheap against its 32x sector median; an energy company at 18x would be trading at twice its sector median.
Step 2: Locate the company within the range. If the industry median is 15x and a company trades at 10x, ask why. Is it a structural competitive disadvantage? A cyclical business where current EBIT is unsustainably high? A one-time D&A charge distorting the denominator? Or genuine undervaluation? The range column gives the typical spread — if the company sits below the bottom of the range, that warrants deep investigation.
Step 3: Compare EV/EBIT to EV/EBITDA. For asset-light businesses like software or financial services, EV/EBIT and EV/EBITDA will be close. For capital-intensive sectors like utilities, transportation, or industrials, EV/EBIT will be meaningfully higher than EV/EBITDA — the gap reflects how much D&A is consuming operating earnings. A wide gap is a signal to scrutinize the capex cycle and asset age.
Step 4: Compare over time. A company's current multiple relative to its own 5-year range is as informative as cross-sectional peer comparison. Use both dimensions before drawing a valuation conclusion. For a live multiple on any specific ticker, use the EV/EBIT Calculator.
What Drives Each Sector's Multiple
Software (32x median)
Recurring subscription revenue, near-zero marginal cost, and high incremental EBIT margins justify the highest multiples in the table. The market pays for forward EBIT, not trailing, because fast-growing software companies see their multiples compress sharply when growth materializes.
Biotech / Life Sciences (40x median)
Pipeline premium and pre-profit companies dominate this sector. Many biotech companies have no EBIT at all, and those that do trade at elevated multiples reflecting the optionality value of drug pipelines and platform technologies that may compound enormously if development succeeds.
Healthcare (20x median)
Defensive, regulated pricing and recurring demand justify a resilience premium. Large-cap diversified healthcare anchors the median; the wide range reflects the contrast between stable hospital systems and high-growth medical device companies with significant R&D pipelines.
Industrials (15x median)
Capital-intensive operations and order-book-driven revenue create steady but cyclical EBIT. Defense and automation sub-sectors trade above median on secular backlog visibility; freight and trucking trade at a discount due to fuel-cost sensitivity and spot-rate exposure.
Utilities (16x median)
Rate-regulated earnings and bond-like cash flows justify stable multiples. D&A is significant for utilities — power plants depreciate over decades — so EV/EBIT is materially higher than EV/EBITDA here. The regulated return on equity framework caps both upside and downside.
Energy (9x median)
Commodity price uncertainty and high capital reinvestment needs keep multiples structurally depressed. Markets apply a cycle-skepticism discount: even when oil is high and EBIT looks elevated, investors assume mean reversion and value on mid-cycle earnings — not trailing peak EBIT.
EV/EBIT vs. EV/EBITDA: When to Use Each
Use EV/EBIT for: Capital-Intensive Sectors
Manufacturers, utilities, transportation companies, and energy producers all carry significant physical assets that genuinely depreciate. Adding back D&A via EV/EBITDA overstates their true earnings power. EV/EBIT reflects the real cost of maintaining the asset base and gives a more conservative, defensible valuation baseline.
Use EV/EBITDA for: Asset-Light Businesses
Software, financial services, and professional services have minimal physical assets. D&A is often dominated by amortization of acquired intangibles — a non-cash accounting charge that does not represent real economic wear. Adding it back via EV/EBITDA gives a cleaner view of operating cash generation without distortion from deal-driven amortization.
Cross-Sector Comparisons
Never compare a technology EV/EBIT of 30x to an energy EV/EBIT of 9x and call energy cheap. The multiples reflect fundamentally different business models, growth rates, capital requirements, and earnings volatility. Meaningful comparison is always within the same industry — the table above gives you the right peer benchmark for each sector.
Cyclical Earnings Trap
Cyclical companies show their lowest EV/EBIT at peak earnings — right before the cycle turns. An energy company at 7x EV/EBIT when oil is at cycle highs looks cheap; the same company at 7x when EBIT normalizes down 40% is expensive. Always benchmark EBIT against mid-cycle estimates, not trailing-twelve-month figures at the peak of a commodity cycle.
Common questions
EV/EBIT by Industry — answered directly.
What is a good EV/EBIT ratio?
A good EV/EBIT ratio is entirely industry-dependent. Technology and software companies commonly trade at 18-30x because the market prices in high incremental margins and fast earnings growth. Energy companies trade at 6-12x due to commodity cyclicality and heavy reinvestment needs. Comparing a 10x energy multiple to a 25x software multiple tells you nothing — the only meaningful benchmark is the median for that company's specific industry and its own historical range. Always compare to peers, not the market average.
What is the difference between EV/EBIT and EV/EBITDA?
EV/EBIT deducts depreciation and amortization from operating earnings, while EV/EBITDA adds them back. This makes EV/EBIT more conservative and more appropriate for capital-intensive businesses where D&A represents real economic wear on physical assets — manufacturing equipment, pipelines, or fleet vehicles that genuinely need replacing. For a software company with minimal physical assets, adding back D&A is largely neutral and EV/EBITDA works well. For an airline or steel mill, D&A is a real cost and EV/EBIT gives a truer picture of operating earnings power.
Which industries have the lowest EV/EBIT ratios?
Energy (6-12x), Retail (8-14x), and Materials (8-14x) trade at the lowest multiples. Energy multiples stay depressed because commodity price uncertainty makes future EBIT unpredictable and high reinvestment requirements consume much of the operating earnings. Retail faces structurally thin margins and ongoing e-commerce displacement. Materials companies face commodity-linked earnings volatility that investors discount heavily. These low multiples reflect genuine business risks, not necessarily attractive valuations.
How do I use EV/EBIT benchmarks to find undervalued stocks?
Compare a company's current EV/EBIT to its industry median from this table. A stock trading at a 30% or greater discount to industry peers warrants deeper investigation — but the question is always whether the discount reflects a real competitive disadvantage or earnings risk that the market correctly sees, or whether the market has mispriced it. Check the company's own historical EV/EBIT range alongside peer comparisons. A sustainable discount to peers with no obvious fundamental explanation is where the opportunity lies.
Why do software companies have such high EV/EBIT ratios?
Software companies trade at 25-45x EV/EBIT because high incremental margins, recurring subscription revenue, and fast growth mean the multiple compresses quickly on forward earnings. A software company growing EBIT at 25% per year trades at 32x today but only 13x on projected earnings four years out — if that growth materializes. The market is paying for 3-5 years of compounding in the current price. When growth disappoints or the business matures, these multiples compress sharply and rapidly.
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