Valuation: Comps & Precedents
For comps, why do you generally prefer EV-based multiples (like EV/EBITDA) over equity-based multiples (like P/E) when comparing companies with different leverage?
Model answer
EV/EBITDA is capital-structure neutral: both the numerator (enterprise value) and denominator (EBITDA, which is pre-interest) are before the effects of financing, so you can compare companies with…
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More from Valuation: Comps & Precedents
- What are the main valuation methodologies?
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