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| ntg_2018_annual_report.pdf 7.61 MB | 7.61 MB |
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CapEx is high
I really don’t think that EBITDA is a good proxy for FCF. if you really wanted a back of the envelope calculation for FCF then use EBITDA-CapEx. That should yield something more accurate.
fcf = ebitda - CapEx, so..
FCF= Cash flows from operations - Cap Ex and more represents equity value of company (what is the value of all the firms assets to JUST the equity investors). FCF is the amount of discretionary cash flows the company has after interest expenses but before debt principal repayments. EBITDA is Cash flow from operations plus D&A and is a proxy for core, recurring business cash flows before the impact of capital structures and taxes. EBITDA corresponds to Enterprise Value which is a measure of the firms CORE business assets to ALL investors. You use EBITDA when you want to ignore the impact of CapEx and standardize companies of different sizes.
All of this to say that the company's high CapEx is driving the divergence between the two.
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