Working on a couple of pitches and was wondering what I should use for my EBITDA for my DCF terminal value. Advice was all over the place on whether I should use Adj. EBITDA because that's what the market was looking at vs. pure EBITDA (EBIT + D&A, literally nothing else, even though I've seen mgmt. add back interest or sbc). A bit confused and would appreciate some help!
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well, it does depends on what the adjustments are and how recurring those adjustments are. adjustments based on spin-off, cost restructurings or any off-events are fine to me. it gets problematic if those adjustments are recurring and been recognized for endless years. SBC is a cash expense and should be recognized as such.
the whole idea of a DCF is to calculate an intrinsic value and the output should not rely on inflated adj. ebitda.
maybe easier if you provide example. but generally, the more conservative you are with your assumptions, the easier it is to defend your assumption
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