How to evaluate EV by EV/EBITDA multiple w/ zero EBITDA?
Guys, hope this message finds you well.
Question is pretty straight, but tricky as well. Let's assume I try to evaluate EV of company B using EV/EBITDA multiple of company A, which is fully comparable to A. The only problem is... zero EBITDA of company B.
What should I do? Any thoughts and ideas are welcome.
Also zero on the last three year average? Otherwise another input?
What's up Ivan.
How are they comparable when one generates an operating profit and the other doesn't....
"Forward EBITDA, normalized EBITDA"
this sounds like a bad comps analysis (unless EBITDA can be normalized to a positive figure - applicable for non-recurring items).
Use EV/Sales or another pre-expense multiple (with the exception of EV/Sales, most are industry specific, like EV/ million subscribers for media or something)
EV / Revenue multiple or something similar
The same way you would value a company using the P/E multiple with zero earnings.
Right, Mr. ER analyst?
I definitely agree about using EV/Sales ratio or so. But the question above was asked during the interview (not to me) and looks strange.
That's the reason it was asked here.
Why change your name and occupation Glasenberg? You aren't fooling anyone.
I don't even try to do this. This is all about stay confidential.
Smth more useful?
Forward EBITDA, normalized EBITDA
Sounds like EBITDA is not a usable metric. Use something else.
move up and use something like EV/Revenue?
Yes use forward (1 year or 2 year) EBITDA or Sales..
use run rate ebitda. otherwise revenue (common for high growth tech) or gross profit multiple (common for building products companies and homebuilders)
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