Enterprise value (EV) is calculated as the market value of the company's common stock plus the market value of outstanding preferred stock if any, plus the market value of debt, less cash and short term investment (cash equivalent).
EV
= market value of company's common stock
+ market value of outstanding preferred stock
+ market value of debt
- cash and short term investment (cash equivalent)
It can be thought of as the cost of taking over a company.
EV/EBITDA multiple
The most widely used EV multiple is the EV/EBITDA multiple.
EBITDA measures a company's income before payments to any providers of capital are made.
The EV/EBITDA multiple is often used when comparing two companies with different capital structures.
Loss-making companies usually have a positive EBITDA
Loss-making companies usually have a positive EBITDA, which allow analysts to use the EV/EBITDA multiple to value them.
The P/E ratio is meaningless (negative) for a loss making company as its earnings are negative.
EV
= market value of company's common stock
+ market value of outstanding preferred stock
+ market value of debt
- cash and short term investment (cash equivalent)
It can be thought of as the cost of taking over a company.
EV/EBITDA multiple
The most widely used EV multiple is the EV/EBITDA multiple.
EBITDA measures a company's income before payments to any providers of capital are made.
The EV/EBITDA multiple is often used when comparing two companies with different capital structures.
Loss-making companies usually have a positive EBITDA
Loss-making companies usually have a positive EBITDA, which allow analysts to use the EV/EBITDA multiple to value them.
The P/E ratio is meaningless (negative) for a loss making company as its earnings are negative.
No comments:
Post a Comment