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Price to EBITDA?

I've always thought that Price and Enterprise Value metrics should have the numerator and denominator on the same basis to make apples-to-apples comparisons (i.e., price to earnings, EV/EBITDA, EV/Sales, etc). However in a few sell side reports I was looking at they included a Price to EBITDA metric in their summary info. Does anybody have any insight as to why they would use P/EBITDA or how often this is used?

Did the analyst's name end in ", CFA" ?

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maybe they had no debt, or were just clueless

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EBITDA is a stupid proxy for CF if you are leveraged. P/CF is fine

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They shouldn't be using P/EBITDA. My guess is that they just don't know any better. You certainly don't want to compare companies based on this ratio.

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Sounds like a cool ratio! No one else is using it!

As for P/CF, really you need to do P/FCFE. P/CF and P/FCFF are not comparable across different leverage ratios.



Edited 1 time(s). Last edit at Tuesday, March 22, 2011 at 02:12PM by bchadwick.

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sometimes they say price but they assume you know its EV, not market value of equity

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Thanks for the input. @starbuk, it was definitely price because the multiples they had were in the 3-4x range.

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