EV/EBITDA is Best Valuation Metric According to New Study

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Analyzing Valuation Measures: A

Performance Horse-Race Over the Past 40 Years

 


Wesley R. Gray


Drexel University – LeBow College of Business; Empiritrage, LLC; TurnkeyAnalyst.com

ValueWalk’s November 2021 Hedge Fund Update: Rokos Capital’s Worst-Ever Loss

InvestWelcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge fund assets near $4 trillion, hedge funds slash their exposure to the big five tech companies, and Rokos Capital's worst-ever loss. Read More

Jack Vogel


Drexel University

November 10, 2011


Abstract: 
We compare the investment performance of portfolios sorted on different valuation measures. EBITDA/TEV has historically been the best performing metric and outperforms many investor favorites such as price-to-earnings, free-cash-flow to total enterprise value, and book-to-market. We also explore the investment potential of long-term valuation ratios, which replace one-year earnings with an average of long-term earnings. In contrast to prior empirical work, we find that long-term ratios add little investment value over standard one-year valuation metrics. 

Number of Pages in PDF File: 18

Keywords: enterprise multiple, price to earnings, price to book, free cash flow, gross profits, valuation metrics

JEL Classifications: G10, G14

Working Paper Series

Date posted: December 13, 2011 ; Last revised: December 14, 2011

valuation metrics

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