I had a question about the multiple being capital structure neutral. EBITDA is capital structure neutral because EBITDA is going to be the same whether or not a company has lots of debt to pay off, or not. If a company is 100% financed by equity or 10% financed by equity, EBITDA is going to be the same right? That's why EBITDA is capital structure neutral right? The reason why EV is capital structure neutral is because a company with lots of debt vs a company with lots of equity is going to have same number for EV assuming an equal number of assets right? Is that why EV is capital structure neutral? Like a company that is valued on the basis of assets alone (mkt cap) is going to have a lower number if only its equity, and not its debt, is taken into account correct? Why are earnings considered levered? Earnings is the number after you subtract interest payments to debt holders (among other things) so it's going to be a smaller number. Why is that considered levered if it's smaller? It just seems odd to call it levered... If my wording is weird in any situation, please let me know.
Earnings are "levered" when they are a component of Return on Equity. ROE is not capital structure neutral. Also, I prefer EV/EBIT or EV/NOPAT (EV/(EBIT*(1-tax rate)). Depreciation is a real cost. Both of these alternatives to EV/EBITDA are also capital structure neutral.