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Strategies & Market Trends : Value Investing

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To: valueminded who wrote (11948)	1/26/2001 10:32:52 PM
From: Bob Rudd	Read Replies (1) of 78825

FCF - I've always used CFO - CAPEX, because it adjusts for working capital changes, which (income +depr+amort-capex) doesn't. EV should be Total debt - [cash & marketable securities]+ market cap. Not to adjust for cash can be misleading in high cash companies like PE and PS are misleading in high debt companies. [For a more accurate read, include preferred and operating leases - sometimes debt by another name] Agree with comments that EV/EBITDA is basically a quick and dirty measure of relative value that does a far better job than PE & PS because of debt inclusion. Basically a first cut, 'Do I want to look further?' tool, leading to further analysis if attractive. I also like it because it's smoother than FCF based ratios and there's some industry data that provides standards of comparison. Just my .02 bob

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