To add to what Basantji said on PE analogy, to apply it on EV/EBIDTA multiple, As a thumb rule, EV/EBIDTA should be around 60% of the fair PE, this is to allow for Interest, Depreciation and Taxes.

The rationale is, think of a company as a debt-free cash-free company (hence the EV would be equal to Mcap).

Assume it is growing at a CAGR of 20%. the fair PE would be 20 (PEG of 1), Considering that it does a PAT of Rs.100 cr. The Mcap would be Rs.2000 cr

Now do some backward calculation to arrive at EBIDTA, at full corporate tax rate of around 33% and some deprecation (there won’t be any other income or interest expense as it’s a debt-free cash-free company), the EBIDTA should be around Rs.160 cr.

Now if you give it an EV/EBIDTA of 20, the company’s value will go upto Rs.3200 cr, which would be very high. Giving it an EV/EBIDTA of 12 (60% of fair PE), the valuation will work out to be Rs.1920 cr (around the fair PE valuation).

One can do it with assuming some debt (for which Interest expense will also come in picture) but more or less the EV/EBIDTA would fall in 60% ballpark of fair PE.