Question
Price/Earnings, Price/EBITDA,and Price/Sales are three metrics used to value companies. For each of the cimpanies below which metric is the best fit. (i) Company A
Price/Earnings, Price/EBITDA,and Price/Sales are three metrics used to value companies. For each of the cimpanies below which metric is the best fit. (i) Company A is an established wireless comoany with strong FCF.However, like many in the industry, their earnings are weighed down by high debt and depreciation costs related to large investments in bandwidth and cell towers. (ii) Company B is a startup ride share company that has grown sales at a tremendous rate since its inception 2 years ago.Due to high startup costs and a very high cost of debt related to being a startup, the company is still cash flow negative and negative net income.However, as sales grow and investment costs decrease, both incone and cash flow are improving over time. (iii) Company C is an established consumer products company with consistent earnings and cash flow.
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