P/E or EV/EBITDA?

[KoolSIM]

Are there good reasons to choose one over the other while valuing a company? When is P/E a good idea and when is EV/EBITDA?

 

[Ramos4rm]

P/E if public, EV/EBITDA if private.

 

[Matt Likes Analysis]

EV/EBITDA if debt levels vary widely in the sector you are analyzing. The Utilities, Telecom and Consumer Staples sectors have some companies with boatloads of debt and others with next to none making P/E useless as a measure for comparison. EV/EBITDA is the great equilizer. EV/EBITDA can also be useful in the Tech sector as it helps in comparing those with net debt to those with net cash. I prefer EV/EBITDA when comparing stocks within any sector.

 

[5X EBITDA]

Dude no serious person would ever use P/E. Come on. What you want to measure is the profitability of the company’s operations, not it’s ability to get a loan.

 

[higgmond]

I have to stop myself from vomiting whenever people start throwing P/E multiples around.

 

[JohnyMac]

I have a similar physiological reaction to those that throw around “dude”

 

[higgmond]

“Dude” is the “bro” of my generation.