Hi guys,
Can you guys tell me if we should use EBITDA or adjusted EBITDA when doing valuation? (Meaning whether or not we should add items like non-recurring items back to EBITDA). Thank you!
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IME I use adjusted, say you have a one-off restructuring charge for FY 16, probably doesn't make sense to incorporate that into your projections unless MD&A lists likely future charges that will be recurring. That's what we were taught during training
Got it, Thank you!
Add all non-recurring items
Got it, Thank you!
The difficulty is really how you end up defining adjusted ebitda. Have seen some bullshit added back...
Adjusted EBITDA. Public markets value the stock of firms based on expected future cash flow.
Since EBITDA is a proxy for cash flow, the public markets will look to exclude one-off items (i.e., use an adjusted EBITDA). Therefore when using public comps (EV/EBITDA), you should use adjusted EBITDA to determine value.
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