for EV/EBIDTA, why the higher, the stock might be more undervalued? text book volumn 4, page 561, Q 13, why RGI is more undervalued than NCI: for NCI: P/EBIDTA=10 EV/EBITDA=14.9 RGI: P/EBITDA=12 EV/EBITDA=12.72 Thanks.
When using EBITDA for comparison; EV is a better measure than price because EV incoporates the value of debt & equty (price is just equity), and since EBITDA is cash flow nrfore both debt & Equity holders are paid, EV should be used as opposed to price. The higher calculated multiple suggests that the EV is too high and thus over valued.