Forward EBITDA vs. LTM
When valuing a company through the comparables methodology, why do we apply the transaction multiple result to LTM EBITDA and trading multiples result to forward EBITDA?
Because for private transactions you have no forward EBITDA. Forward EBITDA are more inisghful as they tell you more about future cash generation than historical numbers.
Private transactions definitely have future / forward EBITDA estimates. How real they are is a different discussion.
As someone else said, you value a company on their future cash flows, but historical figures are typically indicative of what to expect, for certain industries.
Forward EBITDA is the convention as valuation only refers to the company's future prospects.
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