why are Price/adjusted CFO and Price/FCFE less affected than P/BV, P/E, P/EBITDA, and EV/EBITDA ratios?
Can you elaborate your question? Do you mean why are P/BV, P/E etc. less reliable than P/adjusted CFO, Price/FCFE when comparing two different companies internationally?
hi, yes.
As a blind rule, cash flows (when not in negative) are always a better measure of comparability than pure Accounting measures like E, BV, EBIT and EBITDA. When we compare 2 companies internationally, they may be following 2 different accounting principles and accounting measures as such may not be comparable. They would need to be adjusted first. Whereas cash flows would be more comparable than accounting measures.