QUOTE(gark @ Apr 3 2014, 01:50 PM)
EV/Ebitda is just a more comprehensive evaluation rather than plain old PE ratio which does not show the 'cash' and 'debt' portion in the company not the hidden cashflow of D&A. This is only used as a guide vs potential growth.
Taxation is not a straight line, in 1Q you can have low tax and next Q you can have high tax, EV/Ebitda removes all these 'distractions' when making comparison. D&A is not actual an actual 'cost' hence removed to be able to see the valuation of the company at a much clearer state than EPS.
EV accounts for all debts, cash and minority stakes which also show you a clearer picture rather than price/share.
This method is not for everyone, and no means a guaranteed valuation, just a different look at a different angle at a company. Sometimes high PE company can have low Ev/Ebitda and vice versa...
EV/Ebitda should not be used alone, should be used together with PE, BV, FCF and all the common valuation metrics.
Nice input! Boss!Taxation is not a straight line, in 1Q you can have low tax and next Q you can have high tax, EV/Ebitda removes all these 'distractions' when making comparison. D&A is not actual an actual 'cost' hence removed to be able to see the valuation of the company at a much clearer state than EPS.
EV accounts for all debts, cash and minority stakes which also show you a clearer picture rather than price/share.
This method is not for everyone, and no means a guaranteed valuation, just a different look at a different angle at a company. Sometimes high PE company can have low Ev/Ebitda and vice versa...
EV/Ebitda should not be used alone, should be used together with PE, BV, FCF and all the common valuation metrics.
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Apr 3 2014, 02:02 PM

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