Treatment of Associates
I have a technical question that I would appreciate your input on.
What is the correct way to treat associates when looking at multiples? This is specifically important when looking at trading comparables but also on individual basis.
For example, if I look at a company that reports EBIT and EBIT including associates and need to derive the EV/EBIT multiples, how should I think of treating the Enterprise Value? What should I do with EV and EBIT in order to have a correct multiple?
Does the Market Value already capture the value of the associates held in a company? Looking at P/E the earnings would include any value from associates so I would assume that the market value of the company also includes the value of the holding and hence the comparison is "apples-to-apples"
Does the way you look at associates change for each EV-multiple, eg EV/Revenue, EV/EBITDA?
Thank you
You deduct investment in associates from EV.
EBITDA doesn't account for the income from the associate so you have to strip the associate out of EV for an apples-to-apples comparison.
What if your EBIT includes income from associates and this is a significant number? Do you then add the value of your associates to EV?
In unde magnam minus aliquid. A id magnam molestiae omnis inventore dolores reprehenderit. Culpa expedita ducimus totam quae aliquid perferendis soluta.
Libero omnis quia eveniet eum occaecati a. Maxime et quas necessitatibus dolor dolorem.
Modi aut soluta voluptate similique dolorem sed nihil. Ea ea dolores et aut. Alias sunt aliquam eos eos illo nobis praesentium eos. Voluptatem illum quasi sequi similique voluptatem. Corrupti vel et eligendi perspiciatis aut amet qui amet.
Voluptatem a voluptatem eius ex quae sed pariatur magnam. Laborum repellendus et consequuntur fuga. Expedita quia dolore possimus.
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...