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#1
11-29-2007, 05:07 PM
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Re: EBITDA
[ QUOTE ]
Pls evaluate for me the investing prospects for: Comcast, Sprint, MCI, TCI, in the mid-late 1970s without using EBITDA or similar metrics. Or Mirage Resorts/Wynn years before their casinos actually opened and they had years of buildout and CapEx expenses. When a company has no earnings and only real assets are some 'newly minted technology', or vacant unfinished building, what do you use? http://finance.google.com/finance?client=ob&q=WYNN OpIncome negative 2001-05 inclusive. [/ QUOTE ] Najdor, Reading your request, I think I now *understand* why Buffett doesn't use EBITDA. 1. He doesn't like a company without real earnings; he wants earnings now, not forecast. "a bird in hand is worth two in the bush." 2. He also doesn't like capital-intensive assets. Over time, maintaining those assets and the risk of inflation are going to be tough for a business to be profitable. 3. The companies you gave me are too tough for me to try to evaluate. Thanks! [img]/images/graemlins/cool.gif[/img] 
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#2
11-29-2007, 08:19 PM
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Re: EBITDA
the answer is basically what someone already said....
it's just quality of information. and moderate adjustments. my guess is munger doesn't like the fact companies have very negative earnings but then say their EBITDA is positive (or even better, positive on a pro-forma basis). my own guess is he doesn't like the shenanigans companies go thru to get to a pro-forma EBITDA.... Buffet and munger i think look more at cash flow, which is harder to manipulate. less chance to play around with accrual accounting and other non-cash items. cash flow isn't perfect either. but it's probably better. lampert and co look at EBITDA but i would think they dig into the #'s quite aggressively and look at the quality of things.
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#3
11-29-2007, 08:56 PM
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Re: EBITDA
Ebitda has its place, such as for leveraged buyouts. Buffett and Charlie don't do leveraged buyouts, but I am sure they've got lots of proposals based on Ebitda where that it was almost always used to mislead potential investors. You have to understand true capex for a company before you can ignore the big D.
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