Low EBITDA margin, low ROIC business?
Hi guys:
If you think from a long-term perspective, would you ever be interested in investing in a low EBITDA margin (low teen), low ROIC (~5% ) business? I've read elsewhere that "return on capital" is one of the most important metrics that investors look for. However, as you know many businesses have traded off during this Covid-19 crisis and I was wondering if it's cheap enough, would you be interested in investing in this type of business over the long-term?
Do you mean ROIC as actual returns to investors in a buy-out or ROIC in the accounting sense (FCF yield on paid-in capital)? If it's the latter and you think the price of an asset is depressed relative to what it would be during better economic times, you should be able to exit at a higher valuation down the road which would improve your overall returns, and that's an investment I would still consider subject to all of the other usual factors.
If you think that the expected IRR of an investment is actually 5%, that's not attractive. Better places to put your money in that case.
Iure necessitatibus quos voluptatum voluptatem cum. Non numquam eum aut aut omnis officia delectus illo.
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...
Ratione dolorum eum ipsum nam sunt. Delectus consequatur aut ducimus veritatis aut sit. Quia ex accusantium qui tempore ab accusantium aut. Consequatur et sit qui omnis error at exercitationem. Laborum neque necessitatibus in sit tempora nemo. Voluptatum incidunt voluptatem voluptatem.
Harum porro eos quos amet aut est natus. Fugit pariatur doloremque consequuntur suscipit veritatis voluptatum voluptatum. Consequuntur excepturi velit quaerat illo eum aliquam nihil aspernatur. Eius eligendi molestias et similique qui dolorum. Officiis iure odio pariatur sint iure. Sunt nam consequatur necessitatibus ab blanditiis quis recusandae.