Applicable to Most Companies / Industries Revenue Earnings Before Interest & Taxes Operating Income(1) Earnings Before Interest, Taxes, Depreciation & Operating Income(1) + Amortization Depreciation + Amortization Net Income Pre-Tax Income * (1 – Tax Rate) Earnings Per Share Net Income / Weighted Average Diluted Shares Outstanding Levered Free Cash Flow Cash Flow from Operations – CapEx – Mandatory Debt Principal Repayments Unlevered Free Cash Flow EBIT * (1 – Tax Rate) + Non-Cash Expenses That Appear in Cash Flow from Operations – Increase in Working Capital – CapEx Book Value Total Assets – Goodwill – Other Intangible Assets – Liabilities(2) Examples of Industry-Specific Metrics
Retail / Airline Companies: EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization & Rent Oil & Gas Companies: EBITDAX Earnings Before Interest, Taxes, Depreciation, Amortization & Exploration Expense Proved Reserves How much – in millions of barrels of oilequivalent – the company is certain to extract in future years. Daily Production How much in barrels of oil-equivalent (Boe) energy the company is producing each day. Real Estate Investment Trusts (REITs): FFO Funds from Operations AFFO
Adjusted Funds from Operations
Internet Companies: UV PV
Unique Visitors Pageviews
EBITDA + Rental Expense
EBITDA + Exploration Expense -
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Net Income + Depreciation – Gain on Property Sales Net Income + Depreciation – Gain on Property Sales – CapEx -
Notes: (1) Usually you add back non-recurring charges (e.g. Restructuring expenses) and other non-cash expenses (e.g. Stock-Based Compensation) to Operating Income for EBIT and EBITDA. (2) Usually you look at Book Value on a per-share basis, so you would divide BV by Shares Outstanding.
Valuation Multiples Multiple Name: EV / Revenue
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EV / EBIT
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EV / EBITDA
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P/E
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Equity Value / Levered FCF Enterprise Value / Unlevered FCF P / BV
EV / EBITDAR
EV / EBITDAX EV / Proved Reserves EV / Daily Production P / FFO per Share P / AFFO per Share EV / Unique Visitors EV / Pageviews
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Used For: Used for many types of companies; most mos t important for unprofitable ones Used for many types of companies; most mos t important for those with high CapEx high CapEx / D&A Used for many types of companies; most mos t low CapEx / D&A important for those with low CapEx Used for many types of companies; important for banks and financial institutions Very rare because it is capital structuredependent; might be used in distressed or heavy debt scenarios Used when CapEx, Working Capital, or Deferred Revenue are important; also critical in DCFs Used for “Balance Sheet-Centric” companies such as banks and financial institutions Examples of Industry-Specific Multiples Retail, Restaurant, and Airline Companies
Oil & Gas, Mining, and Natural Resource Companies
Real Estate Investment Trusts (REITs) Internet Companies (usually less profitable or pre-revenue ones)
