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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Think4Yourself who wrote (82530)12/22/2000 9:31:59 PM
From: Razorbak  Read Replies (1) of 95453
 
CFPS and EBITDA

Q: I agree with the first part, but not the second. IMO, CFPS is a better valuation indicator than earnings because one is pure cash and the other is an accrual. That's why discounted cash flow analyses (e.g., Net Present Value) start with net earnings and then add/deduct all non-cash items to get back to pure cash flow, which is then discounted back to present value.

I don't agree with the second part of your post, that EBITDA numbers are misleading. As long as you compare EBITDA and Enterprise Value (debt + equity), you negate the potential distortions that can be caused by the interest expense (a measure of total leverage) and the non-cash expenses (depreciation and amortization). I hope that makes sense.

Razor
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