BLUEMOUNTAIN INVESTMENT RESEARCH What Does an …

BLUEMOUNTAIN INVESTMENT RESEARCH W h a t D o e s a n E V / E B I T D A M u l t i p l e M e a n ? Valuing companies is a big part of what we do. Whether debt or equity, public or private, we need to understand value to assess if a price presents an opportunity to create alpha. There is a rich literature on valuation, which is straightforward in theory but often challenging in practice. A business is worth the present value of future free cash flows, but forecasting the magnitude, timing, and riskiness of cash flow streams is inherently difficult. As a result, most investors rely on shorthands for the valuation process. The EV/EBITDA multiple is among the most popular techniques to value businesses. Applied properly, EV/EBITDA can be a very helpful tool. But a naive use of EV/EBITDA leads to valuation mistakes.

BLUEMOUNTAIN INVESTMENT RESEARCH What Does an EV/EBITDA Multiple Mean? Valuing companies is a big part of what we do. Whether debt or equity, public or private,

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