Definition:

EBITDA per Share is a financial metric that measures a company's earnings before interest, taxes, depreciation, and amortization (EBITDA) on a per-share basis. It provides insight into a company's operational profitability relative to its number of outstanding shares.

Formula:

EBITDA per Share = EBITDA / Total Number of Outstanding Shares

How to use the metric:

Investors and analysts use EBITDA per Share to assess a company's profitability and operational efficiency on a per-share basis, making it easier to compare companies of different sizes within the same industry. It helps in evaluating a company's ability to generate earnings from its core operations without the effects of capital structure, tax rates, and non-cash accounting items.

Limitations:

EBITDA per Share does not account for capital expenditures, changes in working capital, or other cash requirements necessary for ongoing operations. It also ignores the impact of interest, taxes, and depreciation, which can be significant for companies with high debt levels or capital-intensive operations. Additionally, it may not be comparable across different industries with varying capital structures and tax environments.

Applies to:

EBITDA per Share is most applicable in industries where companies have similar capital structures and where depreciation and amortization are significant, such as manufacturing, telecommunications, and utilities.

Doesn't apply to:

This metric is less applicable in industries with minimal capital expenditures and depreciation, such as technology and service-based industries, where other metrics like net income or cash flow per share might provide more relevant insights.

Summary:

EBITDA per Share is a useful metric for evaluating a company's operational profitability on a per-share basis, particularly in capital-intensive industries. However, it has limitations due to its exclusion of capital expenditures and financial structure impacts, making it less suitable for industries with low capital intensity.