Metals and mining question
Why would a developing company that may have negative earnings or even very low cash flows trade higher than a producer based on EV/EBITDA?
I get that a developer is highly speculative and may have a higher EV premium based on speculation alone and producers are more predictable, but if a developer typically has very low earnings and sometimes negative earnings why would they trade higher than a producer? It doesn’t make sense to me.
I was recently asked this in an interview, and answered that a producer would trade higher. It doesn’t really make sense.
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