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

To: Bob Rudd who wrote (13867)	2/5/2002 10:05:04 AM
From: TimbaBear	Read Replies (1) \| Respond to of 78753

Bob Rudd: What a mouthful of a post! :~) I don't yet use EV/EBITDA as part of my regular valuation techniques. I think that is because I don't feel as comfortable using "earnings" as I do "free cash flow". Having said that, it seems as though the EVL/EBITDAR reasoning would account for the lease situation after a fashion. But my question is: Is it appropriate to treat a lease like a mortgage? I mean if we put the "L" on the EV side then we are treating it just like any other long term debt. I'm mixed on the appropriateness of that approach. On the one hand, a lease is a commitment, but so are other negotiated arrangements (like long term bulk discounts). On the other hand, if there was no lease, I wouldn't have anything listed on long term obligations, but still the same impact (or worse) on working capital. I've decided that I really don't go out my way to factor the long term lease obligation in unless I'm thinking of going against my better judgement that has been based on free cash flow analysis. In this case, I might look at a favorable development in lease commitment release of obligations to evaluate the impact on cash flow. Timba