tag:blogger.com,1999:blog-8515247115132134144.post3641996006813357891..comments2024-02-17T12:34:01.400-08:00Comments on Illusion of Prosperity: Why I Have Near Zero Confidence in Financial NewsStagflationary Markhttp://www.blogger.com/profile/04568993350246477976noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-8515247115132134144.post-22746438887541208922015-09-11T17:13:12.544-07:002015-09-11T17:13:12.544-07:00Whatever. I still have little faith in financial ...Whatever. I still have little faith in financial news. Actually, I have even less faith in political news.mabnoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-58299168090856412022015-09-11T09:40:36.048-07:002015-09-11T09:40:36.048-07:00I have added an update to this post encouraging pe...I have added an update to this post encouraging people to read your comments. I have slso added the "my personal blunders" tag to reflect my error.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-40095721978886358032015-09-11T09:32:55.813-07:002015-09-11T09:32:55.813-07:00Pacioli,
I see the problem now. I missed the long...Pacioli,<br /><br />I see the problem now. I missed the long-term marketable securities in the first table when I looked at your link and my link didn't include them. My bad. Thanks for clearing that up.<br /><br />That said, the technical definition of "net debt" only includes cash and short-term cash equivalents, not that I should exclude long-term marketable securites when trying to value a company.<br /><br />As for EBITDA, I think I understand where you are coming from now. I don't think I did a good job explaining my point of view, especially to one who is more knowledgeable than myself on this topic.<br /><br />EBITDA should not be looked at in isolation. A company with extremely high debt loads could have an EBITDA that looks pretty good. That's why I was very concerned that debt was being ignored. It wouldn't be the first time.<br /><br />Thanks for your comments. They are much appreciated. Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-1726592515316606502015-09-11T07:25:12.229-07:002015-09-11T07:25:12.229-07:00"If you are talking EBITDA, then you are spec..."If you are talking EBITDA, then you are specifically exluding debt since you are ignoring interest on the debt."<br /><br />You are backwards on this. If you are talking EBITDA, you are trying to evaluate unleveraged earnings (i.e. regardless of capital structure). Therefore, you need to consider ALL capital, i.e. Enterprise Value (equity + net debt). That is why you always see EV with EBITDA, versus P (equity only) with E (earnings, leverage effected).<br /><br />From MY link in my comment:<br /><br />Cash: $1.2<br />Marketable Securities: $5.8<br />Debt: $1.2<br />Shares: 0.936<br /><br />Thus, NET DEBT of $6/share.Paciolinoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-6517486277776080562015-09-10T19:54:50.182-07:002015-09-10T19:54:50.182-07:00People who use EBITDA are either trying to con you...<i>People who use EBITDA are either trying to con you or they're conning themselves. Telecoms, for example, spend every dime that's coming in. Interest and taxes are real costs.</i> - <a href="http://www.gurufocus.com/news/121085/ebitda-warren-buffett-versus-everyone-else" rel="nofollow">Warren Buffett, 2002</a><br /><br />For what it is worth, I am and have been in his camp on this.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-11038346575029514732015-09-10T19:43:03.673-07:002015-09-10T19:43:03.673-07:00As a side note, my last employer was big on EBITDA...As a side note, my last employer was big on EBITDA after the massive accounting scandal.<br /><br />They tied my future bonus compensation to it. I didn't stick around long enough for it to kick in though. I left that sinking ship like a rat would, and sink it eventually did. Sigh.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-18347721613138219132015-09-10T19:09:04.163-07:002015-09-10T19:09:04.163-07:00From my link in the post:
Cash: $5.82 billion
Deb...From my link in the post:<br /><br />Cash: $5.82 billion<br />Debt: $1.24 billion<br /><br />The article talked about the cash being just under $6 billion but made no mention of the debt.<br /><br />My source was Yahoo Finance so most might expect Yahoo Finance to know Yahoo's finances. Just sayin'.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-38752277138273022852015-09-10T19:01:32.996-07:002015-09-10T19:01:32.996-07:00Pacioli,
EBITDA is not a balance sheet concept. I...Pacioli,<br /><br />EBITDA is not a balance sheet concept. It is an earnings concept.<br /><br />EBITDA is earnings before interest, taxes, depreciation, and amortization. That's what the acronym stands for.<br /><br />If you are talking EBITDA, then you are specifically exluding debt since you are ignoring interest on the debt.<br /><br /><a href="https://en.m.wikipedia.org/wiki/Earnings_before_interest,_taxes,_depreciation,_and_amortization" rel="nofollow">EBITDA</a><br /><br /><i> It is intended to allow a comparison of profitability between different companies, by discounting the effects of interest payments from different forms of financing (by ignoring interest payments)...</i><br /><br />See how it says that interest payments are ignored? So no matter how big the debt gets, EBITDA won't care.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-7436574180598896612015-09-10T18:34:52.308-07:002015-09-10T18:34:52.308-07:00The $6/shr is NET debt. So, no, they didn't ig...The $6/shr is NET debt. So, no, they didn't ignore debt in the analysis. Any sum-of-the-parts analysis based on EBITDA is going to be based on NET debt (hence the use of EBITDA as opposed to earnings).<br /><br />https://goo.gl/WexrbLPaciolinoreply@blogger.com