What financial metrics matter the most to PE investors?
A lowly IB analyst here, trying to think a little more deeply about investments and metrics.
Came across the value driver formula from mckinsey with roic, nopat which got me thinking - what is the most important financial metric for PE investors? I sometimes get caught up in thinking qualitatively (is this a "good business", "good management", "good industry") and it's not based in a financial understanding.
I see how IRR and MoM are used to assess the performance of an investment and that broadly speaking deleveraging, multiple expansion, and ebitda growth is important. is that all there is to it for PE investing, these three things? are metrics like roic, nopat and drivers of "growth" not really pertinent to PE investors and is that due to the holding period?
just trying to understand what metrics matter the most to pe investors (i guess an operational metric, not really liquidity ratios or things of that sort) and it would be enlightening to hear any practitioners here discuss what they consider on a day to day basis. it has to be deeper than just thinking about ebitda growth or is that all? greatly interested.
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