Price to EBITDA? should, always, reports, anybody, included

Elliotbay

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?

Zestt

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

Sunshine4ever

maybe they had no debt, or were just clueless

Zestt

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

noel

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.

iteracom

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.

pimpineasy

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

neil1234

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