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PE-focused guy here. I see EBITDA daily. Adjusted EBITDA is just a funny way to say "we found a way to make us look profitable by shifting whatever we want in
by mbesto 7y ago
PE-focused guy here. I see EBITDA daily.
Adjusted EBITDA is just a funny way to say "we found a way to make us look profitable by shifting whatever we want in the cost lines". Unless you know specifically what they are doing to manipulate it, it's basically a bullshit metric to make a company look better than it really is. Often you'll see investment bankers make adj. EBITDA claims and its the buyers job to sniff out really what is going on.
Even EBITDA (which is a standard measure with standard calculations) is considered by many to be a bullshit metric:
https://www.forbes.com/sites/brentbeshore/2014/11/13/ebitda-is-bs-earnings/ https://www.forbes.com/sites/brentbeshore/2014/11/13/ebitda-...
- Benjammer 7y agoLook at WeWork's "Community-Adjusted EBITDA" for another example of the same thing. In their case, they back-loaded contracts on both sides, leasing and sub-leasing, then amoritized the sub-leasing revenue and didn't amoritize the leasing costs, showing huge positive net income at the start of the leasing terms.
- treis 7y agoThere's a difference between GAAP EBITDA and made up EBITDA. A significantly positive GAAP/actual EBITDA means that the business is long term viable. Existing shareholders and/or creditors might get wiped out, but in the event that happens a viable business should rise from the ashes.
- mbesto 7y agoCommunity-Adjusted EBITDA was an absolute joke when WeWork came out with it. However, I kinda get what WeWork was trying to say, it was just stupid to term it that way. Either way, any analyst worth their salt sniffs that stuff out pretty easy. It's basically a PR attempt for (future) public markets, who have less sophisticated investors.
- datlife 7y agoIf so, what are some important metrics you usually look at?
- mbesto 7y agoFor software companies...gross margin tells me everything (assuming they've calculated COGS correctly) For all companies, FCF and to some extent, DCF.