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

To: Graham Osborn who wrote (57560)	7/18/2016 12:58:36 PM
From: Micah Lance	Read Replies (1) \| Respond to of 78954

I like that. I think it was Paul Senior who posted an interview of Howard Marks who said they use industry comparisons of recently acquired companies then use a FCF analysis as a "sanity check." I guess my issue is with the FCF and the inputs that go along with it. I know it is important and will provide the necessary sanity check, but I just want to ensure I am using the correct inputs. I think the best way to do it is to follow Buffett and others and use the government bond as the discount rate. Thanks for the insight and help all!

To: Graham Osborn who wrote (57560)	7/18/2016 1:41:27 PM
From: bruwin	Read Replies (1) \| Respond to of 78954

"EBITDA is misleading or difficult to compare in some industries." Yes, EBITDA is really only a realistic metric for Industrial type companies where you can do the following Calculation :- EBITDA = Turnover - (CoS + SG&A + R&D). In such companies CoS and SG&A can be regarded as "Compulsory" Expenses, which cannot be avoided. Therefore, I would say, it is a useful "comparing" metric with other companies who have similar financial reporting. As a result, a useful comparable metric, IMO, is the ratio of EBITDA/Turnover which gives one a good idea of how much of Gross Turnover or Revenue is left over after having been absorbed by Compulsory Expenses that also affect other like companies. Putting a percentage target to such a metric is, IMO, a useful calculation, and follows the company valuation principle that Buffett uses. In other words, one may only consider buying shares in a company that has an EBITDA/Revenue ratio greater than, say, 15%, or whatever ...