forward-looking EV/EBITDA calculation net, different, following, research

prashantsahni

Hi everybody! I'd be very appreciative if someone helps me to clarify the following issue that's been discussed by my bank's head of research and analysts:

How do we calculate a forward-looking EV/EBITDA multiple? On the denominator side it's quite obvious - we use our projected value driver EBITDA (e.g. for 2008, 2009, etc). On the numerator side there're different opinions:

1) leave numerator as a constant, so basically use the same net debt;
2) use projected net debt for the same period as we project EBITDA (e.g. EV/EBITDA(2009e)=[(current MCap+ Net Debt (2009e)]/EBITDA(2009e)

I personally studied that forward-looking multiples are "forward" in terms of a projected value driver - denominator (in this case EBITDA), and not a numerator . What do you use/think from you experience? I am a level 3 candidate, but frankly speaking i don't remember that CFA Program LOS's adress this issue in detail. Thanks!

Dmitry