I would say that you are splitting hairs here ....
One could look up "explanations" about EV and find several different NUANCES about it.
BUT, ONE of the references that one will find has to do with PURCHASING a company and what would have to be taken into account with regard to the price that one should pay for it .....
NAMELY ---->
(A)
(B)
BUT, my main beef that I have with these mathematical formulas that are derived within the world of stock market investing and company valuation, is when components are used that can vary within relatively short periods of time. In the case of EV, the formula is supposed to give one this value of a company's "Purchase Value" or "Takeover Price", etc.....
But one of the formula's component is "Price". And as one knows a stock's Price can sometimes change quite dramatically over a relatively short period of time one way, and then, not much later, can go in the opposite direction. I have already shown examples of that in previous posts.
Therefore, to say that a company's Takeover Price should be "X" one week, and then fall to "Y" 2 weeks later, and then bounce up, or down, to "Z" a short while later, IMO, is just not a realistic assessment of that type of consideration. Purchases or Takeovers of a company, especially a relatively large one, takes place over a fairly protracted time period. |
