Trend of the EV/EBITDA multiples in the Healthcare sector

Source: BZM analysis based on S&P Capital IQ data.
Average monthly market cap in bn €, from 31/08/2018 to 31/12/2021; monthly measurements.

The graph shows the trend of Enterprise Value (EV)  on next twelve months (NTM) EBITDA market multiple related to Healthcare, Machinery, Apparel, and Chemical sectors, calculated on the data collected  between August 2018 and October 2021. Companies within these sectors  were observed on a global scale and classified  by industry according to  Professor Aswath Damodaran’s work (January 5, 2020).

Looking at the trend of EV/EBITDA multiple it is evident, at first glance, a significant value differential between the Healthcare sector and the other three sectors considered, Machinery, Apparel and Chemicals. This gap persists throughout the entire survey period, despite the multiples’  moderate volatility. March 2020 represented a historic turning point for the global economy due to the raise of the Covid-19 pandemic, resulting in a downward trend in world stock exchanges , with negative impacts on most economic sectors, including those analysed. As of March 31, 2020, the Healthcare sector reported an EV/EBITDA multiple of 13.9x, down 14% from the 16.3x reported in the previous month; the Apparel and Chemical sectors reported a multiple of 6.5x (down 13% and 12%, respectively, from February) and the Machinery sector reported a multiple of 8.0x (down 21% from February). Despite the large decline in the EV/EBITDA multiple, the Healthcare sector was able to recover more quickly than the other three sectors. In fact, as of June 2020, the Healthcare sector multiple was up 41% from March, with an EV/EBITDA value of 19.6x, a slightly higher increase if compared to those reported by the Machinery and Apparel sectors (up 38%), butsignificantly higher if compared with the 27% increase reported by the Chemical sector. Despite the period of higher volatility of the multiple, during the early months of the Covid-19 pandemic, recent EV/EBITDA multiples appear to be returning to pre-Covid values in Machinery, Apparel and Chemical sectors. The Healthcare sector, however, recorded EV/EBITDA multiples consistently higher than pre-pandemic values, with October 2021 multiple of about 17x, increased from a value of about 16x observed for August 2018.