EV/EBIT is > EV/EBITDA
Everyone is familiar with the classic P/E vs. EV/EBITDA debate, but I think most people find it pretty straightforward. Most people though aren't aware of the invisible multiple war: EV/EBIT vs. EV/EBITDA
I keep noticing people using EV/EBITDA as a valuation multiple for comps. I take issue with it because depreciation and amortization are supposed to add context as to how capital intensive the business is. EV/EBIT is much better since it takes into account capital efficiency.
Some alternatives that are more insightful in my view:
EV/EBITA: goodwill amortization can have a huge impact while you don't 'replace' it with capex in the coming years (all expenses to achieve the value that is in that goodwill are above EBITDA).
EV/EBITDAR: Not only amount of assets used, but also decision to rent/lease vs buy is at the discretion of management.
EV/(EBITDA-CAPEX): Same argumentation as previous, but then with actual capex (impacts growing companies most)
What are you talking about? Everybody knows about this... Buffett and Klarman have talked about it countless times. There is literally a question in the M&I interview guide about this.
I’ve had a lot of students pitch companies using EV/EBITDA without really being able to convey why to use it rather than EV/EBIT or another relevant measure.
I think you are getting capital efficiency and margins mixed up.
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