EBITDA

What does EBITDA mean?

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EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company’s operating performance by focusing on the earnings generated from its core business operations, without considering the effects of financing, tax strategies, or non-cash accounting items like depreciation and amortization. Breakdown of EBITDA: Earnings: Refers to the company’s profits. Before Interest: Excludes interest expenses, as they depend on the company’s financing structure (debt vs. equity). Before Taxes: Excludes tax expenses, as …

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How do you know a stock is expensive? Part 3

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Company’s enterprise value to earnings before interest, taxes, depreciation, and amortization. In addition to the P/E ratio and PEG ratio, investors can also use enterprise value to EBITDA to evaluate whether a company is expensive or not. Enterprise value can be defined as the cost of the company to another investor who would want to buy it. In our previous analysis in determining whether a company is expensive or not, those ratios did not take into account debt but the …

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