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03 BIWS Valuation Metrics Multiples

This document provides definitions for common valuation metrics such as revenue, EBIT, EBITDA, net income, and book value that are applicable to most companies and industries. It also lists examples of industry-specific metrics used to evaluate companies in certain sectors like retail, oil and gas, real estate investment trusts, and internet companies. Additionally, it defines frequently used valuation multiples including EV/Revenue, EV/EBIT, EV/EBITDA, P/E, and P/BV and notes which are most appropriate based on the type of company and industry.

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744 views2 pages

03 BIWS Valuation Metrics Multiples

This document provides definitions for common valuation metrics such as revenue, EBIT, EBITDA, net income, and book value that are applicable to most companies and industries. It also lists examples of industry-specific metrics used to evaluate companies in certain sectors like retail, oil and gas, real estate investment trusts, and internet companies. Additionally, it defines frequently used valuation multiples including EV/Revenue, EV/EBIT, EV/EBITDA, P/E, and P/BV and notes which are most appropriate based on the type of company and industry.

Uploaded by

carminat
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Valuation Metrics & Multiples – Quick Reference

http://breakingintowallstreet.com

Valuation Metrics

Applicable to Most Companies / Industries


Revenue Revenue -
EBIT Earnings Before Interest & Taxes Operating Income(1)
EBITDA Earnings Before Interest, Taxes, Depreciation & Operating Income(1) +
Amortization Depreciation + Amortization
Net Income Net Income Pre-Tax Income * (1 – Tax Rate)
EPS Earnings Per Share Net Income / Weighted Average
Diluted Shares Outstanding
Levered FCF Levered Free Cash Flow Cash Flow from Operations –
CapEx – Mandatory Debt
Principal Repayments
Unlevered FCF Unlevered Free Cash Flow EBIT * (1 – Tax Rate) + Non-Cash
Expenses That Appear in Cash
Flow from Operations – Increase
in Working Capital – CapEx
BV Book Value Total Assets – Goodwill – Other
Intangible Assets – Liabilities(2)

Examples of Industry-Specific Metrics


Retail / Airline Companies:
EBITDAR Earnings Before Interest, Taxes, Depreciation, EBITDA + Rental Expense
Amortization & Rent
Oil & Gas Companies:
EBITDAX Earnings Before Interest, Taxes, Depreciation, EBITDA + Exploration Expense
Amortization & Exploration Expense
Proved Reserves How much – in millions of barrels of oil- -
equivalent – 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 Net Income + Depreciation – Gain
on Property Sales
AFFO Adjusted Funds from Operations Net Income + Depreciation – Gain
on Property Sales – CapEx
Internet Companies:
UV Unique Visitors -
PV Pageviews -
Valuation Metrics & Multiples – Quick Reference

http://breakingintowallstreet.com

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: Used For: NOT Used For:


EV / Revenue • Used for many types of companies; most • Banks, financial institutions
important for unprofitable ones
EV / EBIT • Used for many types of companies; most • Banks, financial institutions,
important for those with high CapEx / D&A retail, airlines
EV / EBITDA • Used for many types of companies; most • Banks, financial institutions,
important for those with low CapEx / D&A retail, airlines
P/E • Used for many types of companies; important • Private companies;
for banks and financial institutions unprofitable companies
Equity Value / • Very rare because it is capital structure- • Most companies
Levered FCF dependent; might be used in distressed or
heavy debt scenarios
Enterprise Value / • Used when CapEx, Working Capital, or • Banks, financial institutions
Unlevered FCF Deferred Revenue are important; also critical
in DCFs
P / BV • Used for “Balance Sheet-Centric” companies • Anything other than banks
such as banks and financial institutions and financial institutions

Examples of Industry-Specific Multiples


EV / EBITDAR • Retail, Restaurant, and Airline Companies • If everyone owns their
buildings or if everyone rents
their buildings
EV / EBITDAX • Oil & Gas, Mining, and Natural Resource • Non-Oil &
EV / Proved Reserves Companies Gas/Mining/Natural
EV / Daily Resource Companies
Production
P / FFO per Share • Real Estate Investment Trusts (REITs) • Non-REITs
P / AFFO per Share
EV / Unique Visitors • Internet Companies (usually less profitable or • Non-Internet Companies
EV / Pageviews pre-revenue ones)

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