The magic price

Bloomberg is reporting that Audi is paying 1.1 Billion to purchase Ducati.

The deal, minus debt, would value Ducati at about seven times last year’s earnings before interest, taxes, depreciation and amortization.

So Instagram, a company with zero revenue generation, is worth 1B and Ducati, a motorcycle coveted by many, is worth 1.1B? I really don’t understand how these things work.