RE:RE:RE:RE:RE:RE:RE:March 31st Financialsjdsd0517 wrote: In this business model, you CAN'T use EPS to evaluate the business, you have to use cash flow analysis. That said, you can't use adjusted EBITDA as a cash flow measure either, because it doesn't reflect changes on the balance sheet, which are material in a consolidator strategy.
Another interesting question is why they aren't getting any lift on multiples? A key part of this strategy is to buy businesses at a private multiple, but trade at a much higher public multiple. Usually 2-3X the private multiple that are paid (eg. buy at 3-4X and trade at 6-12X).
If that was actually happening, then the enterprise value should be a multiple of their acquisition costs (and we can use intangibles+goodwill as a proxy for that number), but it isn't.
Intangibles at Sep 30 = $869m
Today's EV = $1,220m
Multiple of intangibles = 1.4X (the lift on the private / public arbitrage)
The number is similarly anemic for Hamed's other company (HIRE): 1.15
That's an interesting signal...
I disagree. But, as I have said before, what happens on one statement affects the other 2. Revenue, balance sheet, cash flow statement are all linked. EBITDA is a smoke and mirror show and I pay no attention to it. Once I learned the EBITDA is a distraction it has saved me from many potential heartaches in wrong investments.
I do agree with your comments re:multiples and is somewhat what I was alluding to in a previous post about lack of profits with these specatcular acquisitions.
I've seen this show many times before for serial acquirers. Acquiring sounds good and makes people feel all warm and fuzzy inside but the acquirers typically pay too much and simply ride some market wave that eventually ends. Serial acquisitions for the sake of acquisitions are almost an equivalent of a Ponzi, acquisitions keep the numbers in a haze and nobody is really sure of the numbers but they're typically ugly once the smoke clears if it ever has the opportunity to clear. I wrote about CPG many times on that very subject. I also predicted that once the jig was up that the former CEO would ride off in to the sunset. All of it came to pass but it took time because the market was ok and capital/debt was available to acquire along with many buyside analysts pushing CPG like it was crack.
Buffet didn't do an acquisition for about 5 years because he said there was nothing exciting and things were over priced. Yet, WELL was doing multiple acquisitions a month because there were so many "good" deals out there during a record stock market climb. uhuh....right. Sure. Makes total sense. Buffett built a business to 3/4 of a trillion dollars because he is smart, not by selling a fictional story. Doesn't have to and he certainly doesn't wait until the last second to release his financials.
I can say my piece but what people do is totally up to them but I see nothing that gives me a tingle here.