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When we use multiples for stock valuation, the denominator is usually a measure of profits such as earnings, EBITDA, EBITA, NOPLAT, and FCFs. Financial websites,
When we use multiples for stock valuation, the denominator is usually a measure of profits such as earnings, EBITDA, EBITA, NOPLAT, and FCFs. Financial websites, newspapers, and Bloomberg quote P/E ratios frequently, but analysts use EV/EBITDA more often to value stocks.
1) What is the main reason for analysts use EV/EBITDA more often for valuation than P/E? Answer:
2) Bloomberg and many other practitioners use EBITDA multiples, but the authors of the Valuation textbook recommend using EBITA multiples. Why? Explain.
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