Why might a company have a higher EV/EBITDA multiple?

A higher EV/EBITDA multiple generally indicates that investors are willing to pay more for each unit of earnings before interest, taxes, depreciation, and amortization generated by a company. This can often be attributed to the perception of higher growth potential, greater profitability, or lower risk associated with the company's business model.

In the case of a company that leases valuable assets, it may have a more favorable financing structure compared to owning those assets outright. Leasing can provide a company with greater operational flexibility and potentially lower upfront costs, which can improve cash flow stability. Investors might view this favorably, especially if the leased assets are crucial to producing high margins or if they contribute significantly to the company's profitability. This is particularly true in industries where asset utilization is key, and the ability to efficiently manage those assets can result in higher earnings potential.

On the other hand, while niche markets can certainly drive higher multiples due to specialized demand, being smaller in size typically leads to a higher risk profile, potentially resulting in lower multiples. Furthermore, fixed rates for expenses can create predictability in cost management but may not significantly influence the valuation multiple in the same way that asset leasing does, as operational flexibility and growth potential are often more enticing to investors.