Question regarding EBITDA
Somewhat stumped by this question – What adjustment do you make to an EBITDA calculation for a retail company?
Could anyone provide some pointers? Also, what are some other relevant EBITDA adjustments for other sectors?
Preferably none. If you're adjusting EBITDA it means there are some dirty non-cash write-offs, or mgmt is claiming cash operational restructuring charges as non-recurring. Onerous leases and inventory write-offs are often seen. You may use EBITDAR for comps.
Thanks oeros (+SB)! Just one other – Assuming two companies are same in terms of growth, margin, and risk. Why would they have different EV/EBITDA multiples?
I answered saying that the difference came down on the market's appraisal of their prospects (as reflected in the MVE component of EV). Is that correct? Did I miss out on anything else?
I'd say you answered right. equity value is perhaps the biggest component of the EV, but remember that EV= equity value + Debt + minority interest + Preferred Stock - Cash. Maybe a firm doesn't have debt at all, while its peer has a ton of debt (the same couls be said with cash). The margins may be roughly the same, and so may revenue growths, but the actual sales may be different (thus, affecting the EBITDA figure, given same margins). Since none of this info was given, I'd say the answer that whoever asked you the question was looking for was the difference of the MV between the two companies' equities.
EDIT: I guess capital structure may be the same, given equal riskiness, so disregard the different debt scenario. This could still happen with cash, though.
Onetime adjustments related to M&A...like inventory revaluations, etc. Random repairs, closings or lawsuits, basically any large expense/influx that doesn't show up in the past couple years and is not a part of daily operations. Do not over-think it.
Everyone has a different approach, compare your EBITDA to other research reports online.
Edit: deleted. A Smith is actually a cool guy
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