Use cases of EV/EBITDA and EV/EBIT
I currently ask myself, under which scenarios I would either use EV/EBITDA or EV/EBIT, as I came across different sources online and everyone seems to say something different.
To my understanding, EV/EBIT is best used for industrial companies, as they are Capex intensive and therefore have high depreciation on their income statement. Accounting for depreciation gives a better picture of the profitability of those companies as D&A here is true economic cost, rather than using EBITDA, which would make comparability wishy washy.
On the other hand, I am aware that depreciation can undergo very different account policies in different jurisdictions. Therefore EBITDA may be a better tool of comparability as it eliminates this issue.
Could you guys give me some clarity on whether I am wrong or not, and when you should prioritize either accounting for depreciation, and accounting for different account policies.
Thank you guys very much in advance!
Push
Alias ipsam sit earum excepturi aliquam. Eligendi corporis enim dolor non. Dolore provident temporibus alias repellat et qui.
Consequatur voluptatem rerum ducimus nam dolorum animi. Aut et exercitationem id saepe debitis culpa. Veritatis et aut dolorem libero quisquam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...