EBITDA

A modified version of EBITDA that strips out non-recurring, irregular, or non-cash items to present a clearer picture of ongoing operational performance. Adjusted EBITDA is commonly used in growth-stage company valuations where standard EBITDA may be distorted by one-off charges or share-based compensation.

EBITDA expressed as a percentage of revenue, indicating how much operating profit a company generates from each pound of revenue before non-cash charges and financing costs. EBITDA margin is a key benchmark for operational efficiency across industries.

Operating profit (revenue minus cost of goods sold and operating expenses) expressed as a percentage of revenue. Operating margin measures how efficiently a company converts revenue into profit from its core business activities before interest and taxes.

The annualised value of recurring subscription revenue. ARR is the primary top-line metric for SaaS and subscription businesses, providing a normalised view of predictable revenue that strips out one-time fees and variable charges.

A ratio used to estimate the value of a company by comparing its market value or enterprise value to a financial metric such as revenue, EBITDA, or earnings. Higher multiples typically reflect stronger growth prospects, margin quality, and intangible asset positions.

A performance benchmark for SaaS and subscription businesses stating that the sum of revenue growth rate and profit margin should equal or exceed 40%. The Rule of 40 balances growth and profitability and is widely used by investors to assess whether a company is creating sustainable enterprise value.

The gradual write-off of an intangible asset's cost over its useful life. Unlike depreciation (which applies to physical assets), amortisation spreads the expense of assets such as patents, software, and licences across the income statement over the period they generate value.

A measure of how effectively a company allocates capital to generate returns, calculated as net operating profit after tax divided by invested capital. ROIC above the cost of capital indicates value creation; below it signals value destruction.

What is EBITDA and why does it matter for valuation?

EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) strips out financing and accounting decisions to show a company's core operational profitability — it's the most common valuation metric in M&A.

How do intangible assets affect company valuation?

Intangible assets typically represent 70-90% of enterprise value in modern companies, directly influencing revenue multiples, EBITDA margins, and acquisition premiums.

What is the link between intangible assets and EBITDA?

Companies with strong intangible assets typically generate higher EBITDA margins because intangibles scale without proportional cost increases — driving higher revenue per employee and lower marginal costs.