New industries which do not have many comparable companies would place a lower importance on comps. These industries could include many up-and-coming tech companies who are first movers in their sectors and may not have any similar competitors. It would be more appropriate to use a DCF in this case....

A capital lease is like buying the asset with debt. You pay interest and principal repayments. These payments are below EBITDA, meaning they are not treated as operating expenses (OPEX), but rather as costs and outflows related to financing. The asset would be effectively owned, so you will also inc...

First, we would seek to understand the industry by reading through industry research and equity research reports, as well as the annual report / 10k. Competitors are often listed here which could be good comparables. Comparables should have a similar business model and play in similar sectors. Also,...

The P in the numerator stands for price, or stock price, which is determined by stock market investors. Stock market investors are very quick to react to the price of gold going up, and may buy gold stocks indiscriminately to catch the trend. P represents the equity value of the business based on st...

Trailing multiples are multiples driven off of past cash flows, such as EV / LTM (Last Twelve Months) EBITDA or P / E (LTM). In private equity, it’s often more appropriate to use trailing multiples because many of the companies being analyzed are private. Private companies will not have forecasts ...

P / FFO Per Share P / AFFO Per Share P / NAV Per Share FFO (Funds from Operations) = net income + D&A + losses on sale – gains on sale -interest income FFO captures the cash flows earned from the core business of renting out properties, while reversing the impact of non-core or […]...

We don’t use EBITDA here since interest expense is often part of the core business. For FIG companies, interest expense is often the cost of the capital which they will invest, almost like a cost of goods sold. They will try to achieve a higher return than their cost of capital, similar to how a [...

In addition to the usual multiples such as EV / EBITDA, P / E, EV / revenue, P / Book Value, and P / Tangible Book Value, a very common multiple to use in consumer retail is EV / EBITDAR. EBITDAR is EBITDA before rent expense. Since some companies will rent their stores and others […]...

You would use common multiples such as P/E, EV / EBITDA and EV / Revenue. For many technology companies that are still growing and not experiencing positive EBITDA or earnings, EV / revenue may be a more relevant multiple. Also, it may make sense to focus on a variety of forward multiples; it is com...

EV / EBITDA is generally a better metric than P/E because EBITDA is a proxy for operating cash flow. EBITDA is also: Before interest, therefore capital structure neutral Before taxes, therefore tax jurisdiction neutral Before depreciation and amortization (D&A), therefore accounting policy neutr...