Using the EV/EBITDA multiple smartly!

Using the EV/EBITDA multiple smartly!

15 comments: Aprilkets In April 2017 : Movers & Shakers Of The Month

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  • ahmad        
    patel
    nov 03,2018 at 11:36 - Reply

    I noted PEG ratio important for investment decision, is this ev/ebitda ? If not then please point for PEG

    • ahmad        
      Team StockAxis
      nov 16,2018 at 11:15

      Dear patel,

      EV/EBITDA is a different ratio as compared to PEG ratio.

      Price/Earnings To Growth - PEG Ratio

      Example: Company A price per share = Rs. 1000

      Company A EPS this year = Rs. 50

      Company A EPS last year = Rs. 40

      Given this information, the following data can be calculated for each company:

      Company A P/E ratio = Rs1000 / Rs50 = 20

      Company A earnings growth rate = (Rs50 / Rs40) - 1 = 25%

      Company A PEG ratio = 20 / 25 = 0.8

      ------------------------------------

      Company B price per share = Rs2000

      Company B EPS this year = Rs 50

      Company B EPS last year = Rs 30

      Given this information, the following data can be calculated for each company:

      Company A P/E ratio = Rs2000 / Rs50 = 40

      Company A earnings growth rate = (Rs50 / Rs30) - 1 = 67%

      Company A PEG ratio = 40 / 67 = 0.6

      Many investors may look at Company A and find it more attractive since it has the lower P/E between the two companies. But compared to Company B, it doesn't have a high enough growth rate to justify its P/E. Company B is trading at a discount to its growth rate and investors purchasing it are paying less per unit of earnings growth.



      Regards,
      Team Stockaxis

  • ahmad        
    Hitesh Baru
    oct 04,2018 at 06:08 - Reply

    Very nice information for investors

    • ahmad        
      Team StockAxis
      oct 05,2018 at 04:33

      Dear Hitesh Baru,

      Thank you for visiting us and believing in us!

      We recommend you to also read the following blogs.

      Using the EV/EBITDA multiple smartly!

      Regards,
      Team Stockaxis

  • ahmad        
    A Sudhakara Reddy
    sep 05,2018 at 08:11 - Reply

    The concept 'EV/EBITDA' can not be explained in better way. It is very much lucid. Thanks.

    • ahmad        
      Team StockAxis
      sep 11,2018 at 10:44

      Dear A Sudhakara Reddy,

      Thank you, Sir, for your appreciation.

      We recommend you to also read the following blogs

      Use The P/E Ratio Smartly!


      Regards,
      Team Stockaxis

  • ahmad        
    Chandresh Fichadiya
    sep 02,2018 at 12:46 - Reply

    THANKS FOR EDUCATE US. EV/EBITDA Ratio concerns

  • ahmad        
    Shobhit Shukla
    aug 12,2018 at 02:10 - Reply

    Dear team, Thanks for providing the info as i am very new in share market also beared a loss. Hope this may help further. Regards, Shobhit Shukla

  • ahmad        
    DR SHENOY
    aug 05,2018 at 04:39 - Reply

    THE ARTICLE IS GOOD BUT LEAVES ONE QUESTION ABOUT ENTERPRICE VALUE. WHAT IS IT AND HOW TO FIND FROM THE BALANCE SHEET/P&L ACCOUNT OR ANY PUBLISHED DATA

    • ahmad        
      Team StockAxis
      aug 09,2018 at 01:49

      Dear DR SHENOY,

      Enterprise Value = the company’s market capitalization + debt + preferred stock – cash/cash equivalents

      where,

      Market capitalization = total shares issued by the company x its share price
      Preferred stock = preference shares
      Cash/cash equivalents = cash in bank account + liquid investments

      Regards,
      Team Stockaxis

  • ahmad        
    Venkatesh
    aug 02,2018 at 11:20 - Reply

    Thanks for the toeqm for good article. How do we make sure to have realistic forward EBITDA?

    • ahmad        
      Team StockAxis
      aug 03,2018 at 11:59

      Dear Venkatesh,

      Thank you for your appreciation, Sir.

      With respect to your query about realistic forward EBITDA, we would like to inform that only presumptive values of the company can be used in forward EBITDA, as the real values cannot be known before the results. For presumptive values we consider various criteria like growth in industry, market share of the company, sales growth expected, margins of the company etc. Thus, all these criteria when put together can help derive a value near the realistic value.

      Regards,
      Team Stockaxis

  • ahmad        
    Satya Swamy
    jul 28,2018 at 10:02 - Reply

    Namaskar,heigenic,perfect explanation

  • ahmad        
    Mahendar C
    jul 16,2018 at 08:27 - Reply

    Very Good & Systematic Explaination about investing in capital market.

  • ahmad        
    P K
    jul 05,2018 at 11:12 - Reply

    Good Article!!

    • ahmad        
      Team StockAxis
      jul 05,2018 at 11:25

      Dear P K,

      Thank you for your appreciation, Sir.

      Regards,
      Team Stockaxis

  • ahmad        
    Swapankumarbhattacharyya
    jun 27,2018 at 10:48 - Reply

    Beautyful

    • ahmad        
      Team StockAxis
      jun 27,2018 at 11:43

      Dear Swapankumarbhattacharyya,

      Thank you for valuable feedback Sir. We advise you to also visit https://stockaxis.com/Lessons-On-Buying-Stocks.aspx for better investment decisions.

      Regards,
      Team Stockaxis

  • ahmad        
    Komi sokou
    jun 18,2018 at 09:26 - Reply

    I will like to join this team but I don't know what to do.

    • ahmad        
      Team StockAxis
      jun 19,2018 at 10:25

      Dear Komi sokou,

      We appreciate your interest in our research. Please write to us at hr@stockaxis.com along with your resume. We look forward to receiving your mail.

      Regards,
      Team Stockaxis

  • ahmad        
    Anant Patel
    jun 18,2018 at 09:22 - Reply

    Useful analysis for investment ideas.I am very happy to give me such important explanation.I can't use any word to give you Thanks. Waiting for such guidance in future also. From : ANANT PATEL

    • ahmad        
      Team StockAxis
      jun 19,2018 at 10:22

      Dear Anant Patel,

      Thank you for trusting us to be your source of an analytical approach for the investment decisions. We appreciate your kind expressions of appreciation.

      Regards,
      Team Stockaxis

  • ahmad        
    Guhan. K
    jun 18,2018 at 06:58 - Reply

    The difference between P/ E versus EV/EBITDA ratio is explained clearly. Also we appreciate that StockAxis team is constantly on the lookout by applying stringent guidelines in selection of stocks using various methodologies. We are proud to be a part of your customer. Keep rocking and make us happy.

    • ahmad        
      Team StockAxis
      jun 19,2018 at 10:28

      Dear Guhan. K,

      Thank you for trusting us to be your source of an analytical approach for the investment decisions. We appreciate your kind expressions of appreciation.

      Regards,
      Team Stockaxis

  • ahmad        
    Vipin Gorawara
    jun 18,2018 at 06:37 - Reply

    Good for knowledge

    • ahmad        
      Team StockAxis
      jun 19,2018 at 10:29

      Dear Vipin Gorawara,

      Thank you for trusting us to be your source of an analytical approach for the investment decisions. We appreciate your kind expressions of appreciation.

      Regards,
      Team Stockaxis