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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: jim_p who wrote (82527)12/22/2000 9:09:24 PM
From: Razorbak  Read Replies (1) of 95453
 
Valuation Metrics

Jim: Thanks for your analytical contributions to the thread. As a former oil & gas analyst, I sincerely appreciate the information you have consistently provided in your analytical rankings.

I agree that cash flow is one of the most widely followed metrics for oil and gas companies. It's also the one that I most often use, even today.

When I worked in the patch, I used to look at John S. Herold's NAV rankings on a regular basis, but I no longer have access to the subscription service.

With respect to EBITDA, I learned early on to be very careful with it's application. Ideally, EBITDA should be compared against total enterprise value (book value of debt + market value of equity) rather than just the equity price since EBITDA is an unleveraged measure of the entire asset's productivity versus a leveraged measure of the equity component of total capital. IMO, the EV/EBITDA multiple combines the best elements of two of the metrics that you currently use in your rankings, namely PCF and overall leverage, but in a single indicator which can be easily sorted.

If you are interested in looking at EV/EBITDA multiples, I'd be happy to do some research to calculate total debt values for the companies in your list. Just let me know.

Thanks again for the excellent analytical work.

Razor
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