| computingEVmultiple {stockAnalyst} | R Documentation |
Calculates Enterprise Value Multiple as EV to EBITDA or EV to sales.
Description
Enterprise value to EBITDA is by far the most widely used enterprise value multiple.Analysts use EV/EBITDA is usually more appropriate than PE alone for comparing companies with different financial leverage (debt), because EBITDA is a pre- interest earnings figure, in contrast to EPS, which is post-interest.Enterprise value to sales is a major alternative to the price- to- sales ratio. The PS multiple has the conceptual weakness that it fails to recognize that for a debt- financed company, not all sales belong to a company’s equity investors. Some of the proceeds from the company’s sales will be used to pay interest and principal to the providers of the company’s debt capital. For example, a PS for a company with little or no debt would not be comparable to a PS for a company that is largely financed with debt. EV/S would be the basis for a valid comparison in such a case. So, EV/S is an alternative sales- based ratio that is particularly useful when comparing companies with diverse capital structures (Jerald E. Pinto, 2020).
Usage
computingEVmultiple(basis = c("sales", "EBITDA"), EV, EBITDA, sales)
Arguments
basis |
character vector. |
EV |
number. |
EBITDA |
number. |
sales |
number. |
Details
According to information provided by Jerald E. Pinto (2020), the method computingEVmultiple is developed for computing Enterprise Value Multiple as EV to EBITDA or EV to sales for the values passed to its four arguments. Here, basis is character string, either "sales" or "EBITDA" , EV is absolute amount of Enterprise Value (in millions of dollars),EBITDA is absolute amount of Earnings Before Interest,Taxes, Depreciation, and Amortization (in millions of dollars), and sales is absolute amount of sales (in millions of dollars).
Value
Input values to four arguments basis, EV, EBITDA,and sales.
Author(s)
MaheshP Kumar, maheshparamjitkumar@gmail.com
References
Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194
Examples
computingEVmultiple("sales",EV=14411,EBITDA=3320,sales=18962)
computingEVmultiple("EBITDA",EV=14411,EBITDA=3320,sales=18962)