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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (11957)	1/27/2001 12:33:16 AM
From: Paul Senior	Read Replies (4) \| Respond to of 78825

re: "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" Perhaps on that basis, but there are other issues to consider as well. For example, if it is desirable for other people to recognize value and so buy the stock and bid the price higher, it's pretty easy to find historical trends - company specific as well as industry - to argue when price/earnings is unusually low or price to sales. But calculating historical EV/EBITDA takes much more work and imo, limits the population of potential investors who will do this work and so come into such an undervalued stock. Furthermore, there are some stocks which historically trade on their relationship to price/earnings or to book value or perhaps to interest rates or dividend yields. Knowing how such stocks or industries trade can be very helpful to the investor. In that vein, I have come to rely on several people here for their knowledge that broadcasters or newspapers, for example, do trade based on cash flows. Applying EV/EBITDA as a general screen against all stocks only would work in two general cases, I believe: finding attractive candidates that also are attractive on price/sales and/or price/book; finding favorable EV/EBITDA stocks in which this is the only outstanding favorable metric, but favorable enough to where one is willing to become obstinate in purchasing and holding regardless of how hidden to others the underlying value might be. My impression from recent posts here is that the stocks people are finding now that fit their favorable EV/EBITDA requirements either do not exist or are of 2nd or 3rd tier companies. Is this right? Or perhaps I am confusing this with the net-net discussions? Paul S.