Know About Some Valuation Ratio

Know About Some Industry Multiples.

Definition- The Enterprise Value to Revenue Multiple is a valuation tools that divides the enterprise value (equity + debt minus cash) by annual revenue to determine the value of a company. It is For early-stage or high-growth businesses that do not yet have positive earnings, the EV to revenue multiple is widely used.

EV to Revenue Multiple Formula

= EV / Revenue

Where:

EV (Enterprise Value) = Equity Value + All Debt + Preferred Shares – Cash and Equivalents

Revenue = Total Annual Revenue

2) EV/EBITDA

Definition- EV/EBITDA is a ratio metric that compares a company’s Enterprise Value (EV) to its Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA). The EV/EBITDA ratio is a popular tool for comparing the relative worth of different firms. The EV/EBITDA ratio is used to compare a company's total worth to the amount of EBITDA it generates on a yearly basis. This ratio tells investors how much they would have to pay if they bought the entire company. This ratio mainly use by Many Industrial and Consumer industries, but not Banks, Insurance, Oil & Gas and Real Estate.

EV to EBIDTA

=EV / EBIDTA

Where:

EV=Enterprise Value=Market capitalization +total debt−cash and cash equivalents

EBITDA=Earnings before interest, taxes, depreciation and amortization

3) EV/EBITA

Earnings before interest, taxes, and amortization (EBITA) is a measure of profitability of the company used by investors. It is beneficial when comparing one company to another in the same industry. It can also provide a more realistic picture of a company's true performance over time in some scenarios.

One advantage is that it shows how much cash flow a company has on hand to reinvest in the business or pay dividends more clearly. It is also regarded as a measure of a company's operational efficiency. This ratio commonly used in several Media industry sub-sectors, Gaming, Chemicals and Bus & Rail Industries.

EV to EBITA

=EV / EBITA

Where:

EV=Enterprise Value=Market capitalization +total debt−cash and cash equivalents

EBITA=Earnings before interest, taxes and amortization

4) PE Ratio

The price-to-earnings ratio (P/E ratio) is a valuation ratio that compares a company's current share price to its per-share earnings (EPS). The price-to-earnings ratio, also known as the price multiple or the earnings multiple, is a ratio that compares the price of a stock to its earnings. In an apples-to-apples comparison, investors and analysts use P/E ratios to estimate the relative value of a company's shares. It can also be used to compare a company's past performance to its own, as well as aggregate markets to one another or over time.

PE Ratio

= Market value of per share/Earnings Per share

5) EV/EBITDAX

EBITDAX is a financial performance metric that is used by oil and mineral exploration companies when reporting earnings.

Earnings Before Interest, Taxes, Depreciation (or Depletion), Amortization, and Exploration Expense"

EBITDAX is a valuation indicator for oil and gas firms that assesses a company's capacity to generate revenue from operations while also servicing debt. By eliminating exploration expenses from EBITDA, EBITDAX increases. When new oil and gas deposits are discovered, firms use EBITDAX to capitalise on exploration expenditures.

EBITDTAX= Earnings before interest, depreciation, amortization, and exploration

6) EV/EBITDAR

It mostly used in industries like hotel and transport sectors; computed as the proportion of Enterprise Value to Earnings before Interest, Tax, Depreciation & Amortization, and Rental Costs

EBITDAR is a profitability metric similar to EBIT or EBITDA, but it is more appropriate for casinos, restaurants, and other businesses with non-recurring or highly variable rent or restructuring costs.

EBITDAR provides analysts with a picture of a company's core operational performance, excluding non-operating expenses including taxes, rent, restructuring charges, and non-cash expenses.

By reducing unique characteristics that aren't directly related to operations, EBITDAR makes it easier to compare one company to another.

EBITDAR=EBITDA + Restructuring/Rental Costs

7) EV/2P Ratio

The EV/2P ratio is a relative valuation multiple that is most commonly used in the oil and gas industry.

The ratio is derived by multiplying the enterprise value (EV), which represents a company's overall value, by the sum of proven and probable (2P) reserves, which represents the amount of room for expansion.

A higher EV/2P ratio than peers indicates that the market values the company higher, whereas a lower ratio indicates a lower valuation. Other factors could justify the overvaluation or undervaluation.

EV/2P= Enterprise Value/2P Reserves

Where:-

2P Reserves=Total proven and probable reserves

Enterprise Value=MC+Total Debt−TC

MC=Market capitalization

TC=Total cash and cash equivalents

8) Enterprise Value/Daily Production: EV/BOEPD

Many oil and gas analysts use this metric, which is also known as price per flowing barrel. This is calculated by dividing the enterprise value (market capitalization + debt – cash) by the number of barrels of oil equivalent per day (BOE/D). BOE is used by all oil and gas businesses to report production. It is trading at a premium if the multiple is high compared to its peers, and it is trading at a discount if the multiple is low compared to its peers.

However, as useful as this metric is, it ignores the potential production from undeveloped fields. To gain a better picture of an oil company's financial health, investors should calculate the cost of developing additional areas.

9) Price to Net Asset Value (P/NAV)

P/NAV is the most important mining valuation metric, period.

The net present value (NPV) or discounted cash flow (DCF) value of all future cash flows of the mining asset less any debt plus any cash is referred to as "net asset value." Because the technical reports provide a very complete Life of Mine plan, the model may be forecasted to the end of the mine life and discounted back to now (LOM).

The following is the formula:

P/NAV = Market Capitalization / [NPV of all Mining Assets – Net Debt]

NAV is a sum-of-the-parts method of valuation, in which each mining asset is valued independently and then added together. Corporate adjustments, such as head office overhead or debt, are made at the end.

10) EV/Resource

The EV/Resource ratio divides the business's enterprise value by the total resources available on the ground.

This metric is most commonly used in early-stage development projects where there isn't a lot of information available (not enough to do a DCF analysis).

The ratio is quite simple, because it ignores both the capital and operating costs of constructing the mine and extracting the metal.

EV/Resource = Enterprise Value / Total Ounces or Pounds of Metal Resource