What is EV / EBITDA? - MoneyWeek Investment Tutorials
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- Опубликовано: 6 фев 2025
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This teacher is excellent. Very, very well explained. Thank you for the video, sir.
Very good
Propnash. Yes that's right. Strictly speaking Enterprise value is Market cap + net debt. And net debt is debt minus cash (assuming the business carries any balance sheet cash). Cheers. Tim
Excellent explanation, really.
The best thing is the comparison between these two ratios and the pitfalls inside the P/E.
Something that took me 2years to understand, you made it make sense in just 2minutes (the P/E multiple). Thank you very much.
You are right that interest is a cost of funding but this is about being mathematically consistent with the calculation. If you are looking at the return to all providers of capital - debt and equity - you use profits before interest (as interest can be paid out of this number) whereas if you are looking just at the return to equity holders you use profit after interest as this must be paid out first. Hope that helps. Tim.
I need to read the exercise before to watch the video that is great for two reasons: I know how come the number and improve my understand easily. Thanks, I like so much your teaching
You teach extremely well. Your explanations make complicated terms for beginners, very easy to grasp. Thanks for these vids.
Hi, English is not my mother tongue and I thought that I will have problems with your lovely British accent but fortunately you speaks very clear. I am so happy that I found your videos. Just it is a pitty we cannot donwload the Tesco balance u have and in this way we can start to interprete the financial figures from companies as I am new investing.
I find this video very helpful. Thank you for the author for explaining the basic means what's stands behind the number. In my opinion, this is the most valuable part, as there are tones of sources which can show me how to calculate, but not what it really means. If you could do a video about WACC, I would really appreciate it!
i used this in my freshman year for accounting, now in my senior year 😎
This video is stunning!
It helps to get the general idea of comparing similar companies
afro84 - I agree that the EV/ebitda measure is certainly not perfect. However it is popular at the moment. EBITDA is indeed open to abuse by the directors of a company just as any other profit measure can be too. That's why you should never rely on a single ratio and always be suspicious when the directors want you to focus on a particular profit measure of their choosing....Tim.
You are so good in explaining , thank you
Christ, that bloody eraser was torturous.
Great video and I found it quite useful, thank you.
Very good videos. As a lawyer working with companies aming to go public in a couple of years, I am using your videos to explain with apples how the company must work in order to be ready to deal with investors. Thanks!
Where are you, sir? This is extremely educational.
These videos will make me a rich man in decades to come, people make out stocks are super complicated but anyone can do it with the aid of the internet, the right books and education :) Great videos thanks
At this point i'd like to congratulate you for all your videos ... they are very clear and pertinent .. I think i'v ereally learned a lot just by paying attention to your videos ... Good job sir.
Enterprise Value/Earnings Before Interest, Tax, Depreciation, Amortization
Excellent explanation! Thank you!
Very nicely explained.
You organized my brain a little bit better now thank you:)
wow i wish i had a teacher like you
A1. Tim is the best finance teacher.
Good video. I would argue that depreciation is not “dodgy”. A better ratio would be EV to unlevered free cash flow.
How are you Mr Tim? I have a burning question in mind. I would like to clarify that if a company has a negative net debt, that is, more cash than debt, what am I suppose to do with the number? Do I need to add the negative net debt to the EV or do I just leave it away?
Thank you. Clear and concise
Loved your explanation. Very clear and to the point. Thank you !! Subscribed for more stuff
Thank you so much for sharing this useful data ! Greatly appreciated.
very appreciable video.
you earn a lot of credit for such an informative video.
thanks for noble contribution.
Outstanding ! God Bless You.
Thank you so much !!!! Very well explained.
Hello there...Great videos. Can you talk about relationship between the household savings rate of a country and its economy. Why a higher household savings rate is better than a lower one?
Excellent video, you're the best!
Wow. Excellent video
Simple and sweet
great job... excellent explanation !!
amazing explanation so good
Nicely explained. But surely EV to Free cash flow is better?
you’re a legend
Excellent and to the point
all fine, but how do you arrive at the price of a stock ? .... like when some analysts say, you should buy the share at x price ?
Excellent explanation. Thank you
Can anyone explain the reason why we deduct cash and cash equivalents while calculating Entreprise Value?
i find the term „enterprise value“ bad - it should be called enteprise price. Value and price are two different things, as Mr Buffet often says.
Imagine enteprise value as the price you would pay if you wanted to buy the company. The more debt a company has, the worse it is for you = so higher price. More cash, less debt = cheaper price for you as you get cash alongside with everything else.
Hope it helped.
@@BorisGligorijevic thank you so much.
Very well explained.
Great video, much appreciated!
When you mention that it will take about 14 years at that rate to get your money back. Are you saying this is the doubling time? ie., With a 100 investment, after 14 years the account is worth 200? All other things being equal for 14 years. Thanks.
Yes, from a business perspective. The logic is the stock price would follow the business success and rise exactly as much, so in 14 years your stock should be basically worth double, at least in theory.
How can I calculate the price of the stock from the EV/EBITDA? Thank you in advance.
Nice vid. I always felt that the pe ratio was a bit of a weird way to evaluate companies. I'll leave it for the noob investors that don't know any better. Thanks for the help.
thank you very well explained
excellent presentation..
I wonder whether EV/net profit ratio would be useful, and if not, why?
when we calculate EV, don't we need to substract cash of the company .
EV=MARKET CAP+DEBT-CASH
7:20 Net debt = Debt - Cash
I like this video but it would have been better if you gave a more thorough explanation of EBITDA, not simply define the acronym but actually find the financial numbers within financial statements. As you do the math, explain precisely which lines on the financial statements feed into the EBITDA calculation. Please consider a follow up video with this level of depth.
Good work!
Nice video
as a finance professional we never recommend which ratios that are better, each should be viewed in a holistic manner to the company as a whole
Kinda funny, if you take every year the Stocks with a EV/EBITDA below 3.5 from the SP500, you will get 30% returns annually
big if true
Net debt means total liability .am i correct.
Dont know whats better, the explaining or the accent.
Enterprise value = Total market capitalization of a firms equity and net debt minus cash?
Thank you!
Wonderful!! Thanks a lot
what does a negative value indicate for ev/ebitda ratio?
possibly a very undervalued stock, meaning a company has loads of cash and no debt and the stock is cheap.
Good one.
thanks a lot
But you're still using the Market CAP in the EV/EBITDA formula. Shouldn't be better and more comprehensive to replace Market CAP with the Assets amount?
hmm
Can't get any simpler than this!
very clear
Why isnt net debt not substract to market cap, does'nt debt lower value instead of increasing it ?
Think of the EV as the takeover price if a company was bought. If you're going to acquire a firm you're also taking on their debt, thus increasing your obligations. So you add this onto the "price" of the company as it's almost like a hidden cost. Similarly, you deduct the cash/cash equivalents because you're going to pocket these anyway so no need to include them in the price.
Because the market cap is not the full capital at the company's disposal. The value of the company is made up of long term debt plus equity. It says long will it take the company return its full value (not just volume of shares) from its business activities if it were purchased for say that price.
my question is: why do people always do not use rounded numbers while explaining things ?
Where I can screen stocks by EV/Ebitda?
Done sir let grow together thank you ❤️
I cannot for the life of me understand why, as a shareholder, I would want to ignore the cost of interest, tax and depreciation. Amortisation I can understand.
1.) Ignoring interest allows the directors to take on lots of debt and then ignore the cost of that debt. Great for management, less so for the ordinary shareholder.
2.) Ignoring tax is just as futile since it gives me a figure that I simply have no claim to!
3.) Depreciation - So who pays to replace my business' assets then?
nice one
Wonder why interest is dropped when Debt is included. Isn't interest a legitimate cost of funding?
Yes it is, but it is more of a financial thing. In ebitda the focus is on business operation, meaning how well the business is generating profit if you take away all the other „noise“. At least I understand it this way.
Sir, I would like to understand what to keep in mind while comparing EV/EBITDA of comparable firms? i.e.
A. What factors/financial figures to see to ascertain what qualifies as a comparable firm of similar size and scale?
B. And also, for a given stock if EV/EBITDA in next quarter falls QoQ , then how to interpret that? Does it mean stock is getting cheaper and good time to buy and vice versa( EV/EBITDA increases QoQ)?
Doesn't th PE ratio better show how good a company is dealing with tax and so on, while EV/EBITDA is just showing earnings that a shareholder will never profit from?
companies can manipulate the value. eg. consider selling a plant or machinery which will come in other incomes , but it will show in profit section which is no way related to the main business. likewise
You forgot to subtract cash liquidity to calculate EV, secondly, you dont explain the important things. Why do you add net debt rather than subtract it? How do you interpret EV/EBITDA??? What does it really tell you?
why minus cash?
the valuation of the company is the sources of capital ... The calculation EV is forward looking into the horizon beyond one year. In particular one estimation of the market cap component is done by computing shareholder value added which is the sum of all future discounted free cash flows which has been projected in the valuation. So the entire EV consists future free cash flows + long term debt.
@fabiolous72 as per macro-economic accounting, S=I (Savings Equals Investment) at Eq. Now as household savings increases, more capital is accumulated in the economy, which allows for greater investment.
Greater Investment allows output to grow and hence High Savings is usually a good practice in Developing Economies.
In countries like America, household savings as a % of income is very low and most of the Capital that the private and public sector needs for investment are borrowed from abroad.
Use EBITDA, or simply EBTMN - Earnings Before Too Much Nonsense 😆
some1 donated the whiteboard eraser!
How often do you make money though? People have been earning money online for the last year after studying Household Wage Project (Just google Household Wage Project). It's not going to be downloadable for long...
Just watched the (yearly?) MSNBC interview with Warren Buffett (2019) and he stated that he doesn't use EBITDA as a metric.
niceeeeee
Memo: EV/EBITDA is a ratio
EV=Enterprise Value
Equity-NetDebt
i love you... interview soon >.
Thank you sir.