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Strategies & Market Trends : Value Investing
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To: TimbaBear who wrote (15956)12/30/2002 4:53:42 AM
From: Bob Rudd  Read Replies (1) of 78625
 
Timba: If I read you correctly, you're primarily expressing preference for a yield over a multiple...and comparing that yield, cash flow yield, to normalized CD rates. A yield, of course, is simply the reciprocal of a multiple - 6% is the same as 16.7 multiple. A matter of personal preference without much real difference, methinks.
The enterprise vs market cap issue, to me is more substantive, in that the market cap approach ignores debt levels where the enterprise perspective adjusts for debt levels thus providing a better comparable whether looking at it as a multiple or as the reciprocal yield. EV/EBITDA is the most popular enterprise measure, but I've come to subtracting Capex from Ebitda or using FCF + Interest in the denominator to produce 2 measures of EV/FCF, either of which could be inverted to produce a yield.
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