4 ms·

Why can't the comparison context be from one year to the next year?

by swamp40 5y ago

ericmay 5y ago
Because your choice isn't "invest or not" but invest relative to other potential investments in the marketplace.
- mbesto 5y ago
  The parent comment is right. EBITDA is used for both industry comparison as well as YoY trends. For YoY it's used to try to eliminate "noise".
  - ericmay 5y ago
    YoY trends don't matter in isolation as you're trying to decide to make an investment.
    - mbesto 5y ago
      > YoY trends don't matter in isolation as you're trying to decide to make an investment. What. You 100% can make investing decisions in isolation. I don't think this is what you meant you say, because this makes absolutely no sense at all. If someone comes to me and says "if you give me a dollar today, I'll give you $10 tomorrow" I really don't need to consider anything else. Sure, someone else might say "I'll give you $11 instead", but if the deal is there and I can analyze that the risk of default is minimal, then I can absolutely make that decision in isolation.
      - ericmay 5y ago
        We must be talking past each other. I have no idea what you're talking about. What do you mean by you can make a decision in isolation? How would you know that giving someone a dollar for 10 dollars tomorrow is a good investment unless you have other investments or investment opportunities to compare it to? And even so, how would you construct a life such that you were naive to all investment opportunities until this single one arises? It doesn't make sense.
        mbesto 5y ago
        > I have no idea what you're talking about. Clearly. I said: - EBITDA is used for both comparison and YoY trends You replied: - YoY trends don't matter in isolation All of my clients (PEGs) used EBITDA both as a tool to normalize YoY trends and to do like for like comparisons of comparable assets. Ultimately this is to evaluate whether they want to make an investment or not. Since you cared to provide some contradictory clarification to my comment, I can only assume you were disagreeing that EBITDA can only be used for comparative measures, which is 100% not true as per practice. Hence my example was that in theory you could make an investment decision in isolation (as naive as that might be).
        ericmay 5y ago
        I think the person in the OP edited their post. They no longer mention YoY changes which is what the comment I replied to was asking about and I responded to. All I was saying is that you have to have context and something to compare the YoY to and you can't simply look at a YoY growth rate. It's literally meaningless to do so without comparables. It's like saying the velocity of something is 50, ok who cares unless you can tell me how it relates to some other thing. If a company grows 100% YoY I don't care without information relating it to other investment options. 100% could very well be really bad unless I know what is normal, below average, above average, etc. So idk what's really going on here anymore. I think something has become confused that's causing this conversation to go in useless circles.

Why can't the comparison context be from one year to the next year?

ericmay 5y ago

Because your choice isn't "invest or not" but invest relative to other potential investments in the marketplace.

mbesto 5y ago
The parent comment is right. EBITDA is used for both industry comparison as well as YoY trends. For YoY it's used to try to eliminate "noise".
- ericmay 5y ago
  YoY trends don't matter in isolation as you're trying to decide to make an investment.
  - mbesto 5y ago
    > YoY trends don't matter in isolation as you're trying to decide to make an investment. What. You 100% can make investing decisions in isolation. I don't think this is what you meant you say, because this makes absolutely no sense at all. If someone comes to me and says "if you give me a dollar today, I'll give you $10 tomorrow" I really don't need to consider anything else. Sure, someone else might say "I'll give you $11 instead", but if the deal is there and I can analyze that the risk of default is minimal, then I can absolutely make that decision in isolation.
    - ericmay 5y ago
      We must be talking past each other. I have no idea what you're talking about. What do you mean by you can make a decision in isolation? How would you know that giving someone a dollar for 10 dollars tomorrow is a good investment unless you have other investments or investment opportunities to compare it to? And even so, how would you construct a life such that you were naive to all investment opportunities until this single one arises? It doesn't make sense.
      - mbesto 5y ago
        > I have no idea what you're talking about. Clearly. I said: - EBITDA is used for both comparison and YoY trends You replied: - YoY trends don't matter in isolation All of my clients (PEGs) used EBITDA both as a tool to normalize YoY trends and to do like for like comparisons of comparable assets. Ultimately this is to evaluate whether they want to make an investment or not. Since you cared to provide some contradictory clarification to my comment, I can only assume you were disagreeing that EBITDA can only be used for comparative measures, which is 100% not true as per practice. Hence my example was that in theory you could make an investment decision in isolation (as naive as that might be).
        ericmay 5y ago
        I think the person in the OP edited their post. They no longer mention YoY changes which is what the comment I replied to was asking about and I responded to. All I was saying is that you have to have context and something to compare the YoY to and you can't simply look at a YoY growth rate. It's literally meaningless to do so without comparables. It's like saying the velocity of something is 50, ok who cares unless you can tell me how it relates to some other thing. If a company grows 100% YoY I don't care without information relating it to other investment options. 100% could very well be really bad unless I know what is normal, below average, above average, etc. So idk what's really going on here anymore. I think something has become confused that's causing this conversation to go in useless circles.