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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (11786)1/11/2001 1:36:04 PM
From: Bob Rudd  Read Replies (2) of 78476
 
Cash flow: Gabelli has 'evolved' and now emphasizes FCF instead of EBITDA. EBITDA, because it's bases on GAAP and for other reasons has serious limitations, but I use it [in EV/EBITDA]for a quick and dirty business value comparison because it incorporates debt and has the smoothness of accrual-based GAAP. By contrast, neither P/S [Fisher, O'Sh.] nor PE [Dreman] consider debt though you can incorporate a debt criteria element in screens and achieve similar results.
One of the really tough things about FCF though is figuring what's maintenance CAPEX and what's investment CAPEX. Sometimes they're appropriately separated, sometimes not.
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