What is EV / EBITDA? - MoneyWeek Investment Tutorials

Рет қаралды 266,965

13 жыл бұрын

Don't miss out on Tim Bennett's video tutorials -- get the latest video sent straight to your inbox each week, before it's released on KZfaq: bit.ly/TimBSubscribe
To receive Tim's 50 FREE MoneyWeek Basics emails: bit.ly/mwk-basics
Watch over 100 of Tim's videos for free: MoneyWeek.com/tutorials
Or download them to your mobile device: bit.ly/TimBpodcast
For the most important financial stories and how to profit from them: MoneyWeek.com
/ 110326662354766
/ moneyweek
Video series by CFA UK Highly Commended journalist Tim Bennett. / timmoneyweek

Пікірлер: 117

@fernandokleinrocha1 9 жыл бұрын

This teacher is excellent. Very, very well explained. Thank you for the video, sir.

@patrickng5900 3 жыл бұрын

Very good

@CaravaggioRoma 9 жыл бұрын

Excellent explanation, really. The best thing is the comparison between these two ratios and the pitfalls inside the P/E.

@johnkozak7446 4 жыл бұрын

You teach extremely well. Your explanations make complicated terms for beginners, very easy to grasp. Thanks for these vids.

@MoneyWeekVideos 13 жыл бұрын

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

@tinnguyen2219 5 жыл бұрын

Thank you so much for sharing this useful data ! Greatly appreciated.

@bessymalobola1338 Жыл бұрын

Something that took me 2years to understand, you made it make sense in just 2minutes (the P/E multiple). Thank you very much.

@MoneyWeekVideos 11 жыл бұрын

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.

@monlivreetmoi 3 жыл бұрын

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

@krishh17 3 жыл бұрын

Loved your explanation. Very clear and to the point. Thank you !! Subscribed for more stuff

@MoneyWeekVideos 12 жыл бұрын

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.

@ilyakharkovich5500 Жыл бұрын

This video is stunning! It helps to get the general idea of comparing similar companies

@sukhbirkapoor309 2 жыл бұрын

You are so good in explaining , thank you

@johnparadise3134 6 жыл бұрын

Enterprise Value/Earnings Before Interest, Tax, Depreciation, Amortization

@ShyngysBo 5 ай бұрын

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!

@mdtauseefibrahim323 6 жыл бұрын

very appreciable video. you earn a lot of credit for such an informative video. thanks for noble contribution.

@plstrom 12 жыл бұрын

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.

@RestAtMe 3 жыл бұрын

Thank you so much !!!! Very well explained.

@oliolioli1765 10 жыл бұрын

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.

@sidhusajan8804 8 жыл бұрын

great job... excellent explanation !!

@myrrhsee1 11 жыл бұрын

Great video, much appreciated!

@rodctenis 12 жыл бұрын

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!

@amitshah1266 5 жыл бұрын

Excellent explanation. Thank you

@milzijex7340 6 жыл бұрын

A1. Tim is the best finance teacher.

@catherinesmithsom1796 7 жыл бұрын

amazing explanation so good

@bharatmittal9937 4 жыл бұрын

Very nicely explained.

@willm6280 2 жыл бұрын

Thank you. Clear and concise

@fabiolous72 13 жыл бұрын

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?

@viv2502 2 ай бұрын

Excellent explanation! Thank you!

@StayPolishThinkEnglish 2 жыл бұрын

Where are you, sir? This is extremely educational.

@jesusruiz523 3 жыл бұрын

Excellent video, you're the best!

@milanoroma1396 8 жыл бұрын

excellent presentation..

@mohammadkishor8736 Жыл бұрын

Outstanding ! God Bless You.

@zamirnitzan3746 Жыл бұрын

You organized my brain a little bit better now thank you:)

@Da_Gaming_Dad 3 жыл бұрын

wow i wish i had a teacher like you

@Kwilson3828 4 жыл бұрын

Excellent and to the point

@kajtova 13 жыл бұрын

How can I calculate the price of the stock from the EV/EBITDA? Thank you in advance.

@alphamsk7370 4 жыл бұрын

Wonderful!! Thanks a lot

@dotaass 11 жыл бұрын

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?

@sunnyabdi8729 3 жыл бұрын

thank you very well explained

@robertdukelow9376 3 жыл бұрын

Wow. Excellent video

@MrSinghSAmit 2 жыл бұрын

Simple and sweet

@jaslehal2412 4 жыл бұрын

Good work!

@xdianaxgh 10 жыл бұрын

thanks a lot

@KH-on5pu 5 жыл бұрын

you’re a legend

@johnparadise3134 6 жыл бұрын

Enterprise value = Total market capitalization of a firms equity and net debt minus cash?

@deepakp2435 4 жыл бұрын

Thank you!

@pratik_work256 4 жыл бұрын

Thank you sir.

@hirenpawar8337 6 жыл бұрын

Good one.

@hansmatheson5976 2 жыл бұрын

Christ, that bloody eraser was torturous. Great video and I found it quite useful, thank you.

@michaeldavis4491 7 жыл бұрын

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

@yost28 12 жыл бұрын

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.

@naggie26june 10 жыл бұрын

Where I can screen stocks by EV/Ebitda?

@MishalMaganlal 3 жыл бұрын

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 ?

@maanavshuklaa Жыл бұрын

Nice video

@caschong7543 4 жыл бұрын

very clear

@aightm8 2 жыл бұрын

Nicely explained. But surely EV to Free cash flow is better?

@propnash 13 жыл бұрын

when we calculate EV, don't we need to substract cash of the company . EV=MARKET CAP+DEBT-CASH

@CaseyBurnsInvesting 4 жыл бұрын

7:20 Net debt = Debt - Cash

@CHEESYhairyGASH 12 жыл бұрын

nice one

@MSM19 4 жыл бұрын

Can't get any simpler than this!

@leopuneet 6 жыл бұрын

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)?

@amithachandima3318 3 жыл бұрын

Net debt means total liability .am i correct.

@RedondoBeach2 5 жыл бұрын

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.

@GnaugaJ 10 жыл бұрын

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.

@BorisGligorijevic 4 жыл бұрын

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.

@muabyt7333 6 жыл бұрын

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

@Walleggwp 5 жыл бұрын

big if true

@adj1bernier 7 жыл бұрын

Why isnt net debt not substract to market cap, does'nt debt lower value instead of increasing it ?

@IMrNuminous 7 жыл бұрын

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.

@ricardofraser4243 7 жыл бұрын

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.

@memeking5052 4 жыл бұрын

Can anyone explain the reason why we deduct cash and cash equivalents while calculating Entreprise Value?

@BorisGligorijevic 4 жыл бұрын

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.

@memeking5052 4 жыл бұрын

@@BorisGligorijevic thank you so much. Very well explained.

@jimmypetelol 3 жыл бұрын

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

@boavlog2989 4 жыл бұрын

Done sir let grow together thank you ❤️

@parth8798 4 жыл бұрын

what does a negative value indicate for ev/ebitda ratio?

@BorisGligorijevic 4 жыл бұрын

possibly a very undervalued stock, meaning a company has loads of cash and no debt and the stock is cheap.

@m.bouanane4455 4 жыл бұрын

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?

@mzar62458 4 жыл бұрын

hmm

@jackdexterior13 3 жыл бұрын

Dont know whats better, the explaining or the accent.

@samychihi6317 Жыл бұрын

my question is: why do people always do not use rounded numbers while explaining things ?

@almosthuman89 13 жыл бұрын

@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.

@afro84 12 жыл бұрын

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?

@mdkhbabu12 10 жыл бұрын

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...

@Vagabund92 5 жыл бұрын

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?

@2prask 5 жыл бұрын

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

@gopinathmaravan 7 жыл бұрын

why minus cash?

@ricardofraser4243 7 жыл бұрын

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.

@pigslefats 11 жыл бұрын

Wonder why interest is dropped when Debt is included. Isn't interest a legitimate cost of funding?

@BorisGligorijevic 4 жыл бұрын

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.

@Seigo 3 жыл бұрын

Use EBITDA, or simply EBTMN - Earnings Before Too Much Nonsense 😆

@greatjaygatsby 4 жыл бұрын

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?