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” ?
maybe they had no debt, or were just clueless
EBITDA is widely used as a proxy to CF; What is on the same basis as Price? That doesn’t make no sense. EBITDA is just earnings plus financing costs and noncash items. P/CF is a pretty common metric.
EBITDA is a stupid proxy for CF if you are leveraged. P/CF is fine
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.
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.
sometimes they say price but they assume you know its EV, not market value of equity
Thanks for the input. @starbuk, it was definitely price because the multiples they had were in the 3-4x range.