Multiples Question
In a comps analysis, can a p/e ratio be higher than peer median while ev/ebitda ratio be lower? Why or why not? Thanks.
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yes, if the company has:
1) a higher than average cash balance; and / or 2) a higher than average amount of debt; and / or 3) a higher than average depreciation & amortization / capitalized expenditures.
Yes it can. Take a look at Amazon and imagine you're comparing to a lot of similar companies.... From Yahoo Finance:
http://uk.finance.yahoo.com/q/ks?s=AMZN
If you think about it, there is no link between earnings and enterprise values so there is no reason why EV / EBITDA should have a solid link to P / E, so there is no reason why they cannot each fluctuate wildly with respect to each other. Poorly worded post I know, tired.
This is a dangerous way to look at this question. There is ABSOLUTELY a link between earnings, ebitda, enterprise value, and stock price. The link is not constant and the relationship can vary depending on factors such as capital structure, cash balance, and the line items between EBITDA and Net Income such as the amount of capitalized expenditures (and therefore depreciation & amortization), interest (capital structure dependent), tax rates, etc. But there is DEFINITELY a link. As these factors vary versus the mean of the company's peer set, the EV / EBITDA and P / E multiples can vary either upward or downward versus the company's peers and produce the situation the OP is describing.
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