RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:NoShort - The Bottomless fool, The Tree Planter....Oh boy, there is so much wrong in your post it's hard to know where to begin. I will start with the basics and will not resort to name calling. And since i know you don't believe anything I say (your oft used ad hominem attack of calling me a liar), I am going to point you to other sources
- the value of any firm (or company) is the discounted value of its ability to create free cash flow. This isn't my definition, it is the classic corporate finance definition. (this book if you want a deep dive: https://www.wiley.com/en-us/Valuation%3A+Measuring+and+Managing+the+Value+of+Companies%2C+7th+Edition-p-9781119610885)
- the value of the firm is independent of how it is financed, other than issues related to bankruptcy risk (see Miller & Modigliani, as well as Altman).
- Quote: "The value of a firm is basically the sum of claims of its creditors and shareholders. Therefore, one of the simplest ways to measure it is by adding the market value of its debt, equity, and minority interest. Cash and cash equivalents would then be deducted to arrive at the net value." (https://efinancemanagement.com/investment-decisions/value-of-a-firm)
- based on the above, in coming up with the value based on cash flows (enterprise value), we then need to adjust for capital structure. If you are using an EBITDA multiple, you end up with enterprise value.
- Note that the concept of an EBITDA/market multiple is nonsensical since the numerator is equity only, but the denominator excludes debt service costs)
- As a result of the above, your calculation of equity value is incorrect because you are applying an EV/EBITDA multple and then ignoring capital structure.
- after using your estimates and multiples, you end up with a stock value of $1.75
Next question? Or attack?
Noshortsallowed wrote: The whole point of attributing a multiple to a cash flow analysis contemplates debt. The idea is that you can't assess EPA (most often because of things like debt) so you attribute a multiple to its cash flow/Ebitda. Yet you discount the debt as well to its CURRENT cash flows and attribute NOTHING to its growth prospects. You are so misleading with your analysis that it amounts to lies.