Hello, Thanks for the wonderful explanation. I have one doubt on this session. Whether EV of the stocks changes daily based on the market price or it will be calculated at the end of every 12 months (after yearly earnings)???
Just a quick question on ev calc. You mentioned the calculation is market capitalization plus debt. This in your example 100 + 90 mill for the second company; inflating the ev/ebitda to 19
I am not sure I understand. At 3:55 where you calcule the PE ratios, you say that the 100M£ and 10M£ are the market capitalisations for the two firms of your example. Earlier on, as well as at 9:40 you say those values are shareholders equity and use them to compute ROE. Please correct me if I am wrong, but my understanding is that market capitalisation and shareholders equity are not the same. There can be a large difference between them, depending upon the book to market ratio.
thanks for your answer. Yes I understand that. What I don't understand is why you used market cap in the denominator when calculating ROE (return on equity) at around 9:40 My uderstanding is that one ought to divide net return by shareholders equity (and not by market cap as you seem to have done) in order to obtain ROE. Please correct me if I am wrong. Thanks
Thanks for your answers. I like the Sir Tweedie quote - I am coming more and more to the realisation than it can be applied to many aspects of investing
Tim, I love your videos, and I learned a lot from you over the last several years. By no means, I have any bad intention, but I don't think this example is a valid example for P/E calculation. In both your examples, you are using Equity as the replacement for the market cap (you use book value as opposed to market value). I don't believe equity is a valid measure to reflect market cap, especially if the company has a lot of intangible asset like brand names. Apple for example could be traded 20x times its book value. The point, I am trying to convey is that in both your examples, it could've been very well be the case that both companies have very similar market value, in which case would've made the P/E values not be deviating this much between two examples.
Hi. Thanks for the question. I actually just use the term "equity" to refer to market cap in the P/E example (rather than in it's pure balance sheet sense). The P/E ratio always uses share price rather than book value per share. The adjustment to get to EV is then to adjust for MV of debt (tricky sometimes) minus cash. Tim
Okay so what is a good number? I’m looking at EV/EBITA for Pfizer is 19 but I still don’t know if that’s a good number or not so good. Why not give examples of good and not so good numbers for comparison? Thank you
Hi. All depends on the sector and, to an extent, the firm you are looking at within in. Difficult to give a standard benchmark unfortunately, as with other ratios. Tim
Thank you for an excellent video!! Reminds me to sit down and take a serious look at all your videos.
Great video Tim! I'm a junior analyst at a private asset management firm and your videos help me ALOT! Thank you!
Great introduction to EV/EBITDA. Thanks for the video.
Thank you for a very clear explanation.
you are an excellent teacher. Thank you.
great teaching ! from montreal
Thanks for the explanation
Great explanation. Thanks
so ideally would one be looking for companies with a low PE but with little debt??
Hello, Thanks for the wonderful explanation. I have one doubt on this session. Whether EV of the stocks changes daily based on the market price or it will be calculated at the end of every 12 months (after yearly earnings)???
Well explained...
Just a quick question on ev calc. You mentioned the calculation is market capitalization plus debt. This in your example 100 + 90 mill for the second company; inflating the ev/ebitda to 19
I am not sure I understand. At 3:55 where you calcule the PE ratios, you say that the 100M£ and 10M£ are the market capitalisations for the two firms of your example. Earlier on, as well as at 9:40 you say those values are shareholders equity and use them to compute ROE. Please correct me if I am wrong, but my understanding is that market capitalisation and shareholders equity are not the same. There can be a large difference between them, depending upon the book to market ratio.
thanks for your answer. Yes I understand that. What I don't understand is why you used market cap in the denominator when calculating ROE (return on equity) at around 9:40 My uderstanding is that one ought to divide net return by shareholders equity (and not by market cap as you seem to have done) in order to obtain ROE. Please correct me if I am wrong. Thanks
Thanks for your answers. I like the Sir Tweedie quote - I am coming more and more to the realisation than it can be applied to many aspects of investing
Tim, I love your videos, and I learned a lot from you over the last several years. By no means, I have any bad intention, but I don't think this example is a valid example for P/E calculation. In both your examples, you are using Equity as the replacement for the market cap (you use book value as opposed to market value). I don't believe equity is a valid measure to reflect market cap, especially if the company has a lot of intangible asset like brand names. Apple for example could be traded 20x times its book value. The point, I am trying to convey is that in both your examples, it could've been very well be the case that both companies have very similar market value, in which case would've made the P/E values not be deviating this much between two examples.
Hi. Thanks for the question. I actually just use the term "equity" to refer to market cap in the P/E example (rather than in it's pure balance sheet sense). The P/E ratio always uses share price rather than book value per share. The adjustment to get to EV is then to adjust for MV of debt (tricky sometimes) minus cash. Tim
great video, could be better with a bit higher volume
Okay so what is a good number? I’m looking at EV/EBITA for Pfizer is 19 but I still don’t know if that’s a good number or not so good. Why not give examples of good and not so good numbers for comparison? Thank you
Hi. All depends on the sector and, to an extent, the firm you are looking at within in. Difficult to give a standard benchmark unfortunately, as with other ratios. Tim
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Is this where you went Tim?
Yes - I used to make videos for Moneyweek but now I do it here. Hope you enjoy them!