How is this Company's FCF and EBITDA so wildly different?

HY-HY's picture
Rank: Senior Monkey | banana points 78

any help would be GREATLY appreciated. I just can't figure this out and it would be a lifesaver right now

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Comments (5)

Aug 12, 2018

CapEx is high

Aug 13, 2018

I really don't think that EBITDA is a good proxy for FCF. if you really wanted a back of the envelope calculation for FCF then use EBITDA-CapEx. That should yield something more accurate.

Aug 13, 2018

fcf = ebitda - CapEx, so..

Aug 13, 2018

FCF= Cash flows from operations - Cap Ex and more represents equity value of company (what is the value of all the firms assets to JUST the equity investors). FCF is the amount of discretionary cash flows the company has after interest expenses but before debt principal repayments. EBITDA is Cash flow from operations plus D&A and is a proxy for core, recurring business cash flows before the impact of capital structures and taxes. EBITDA corresponds to Enterprise Value which is a measure of the firms CORE business assets to ALL investors. You use EBITDA when you want to ignore the impact of CapEx and standardize companies of different sizes.

All of this to say that the company's high CapEx is driving the divergence between the two.

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Aug 13, 2018