EBITDA Yield equals Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) / Enterprise Value (EV). It is the inverse of the EV to EBITDA.
The screener only has EV to EBITDA available to screen with (As one of the four Factors with sliders) but EBITDA Yield is available as an output column.
Calculated On Trailing 12 Months
All the F-Score ratios are calculated on a trailing 12 months (TTM) basis.
This means the last twelve months (not the company’s financial year) is compared to the same period in the past. We do this to make sure that the screener data includes the latest, most up to date, financial results of the company.
Use it to implement the Acquirer’s Multiple investment strategy
You can use this ratio to implement the Acquirer’s Multiple investment strategy as explained in the excellent book by Tobias Carlisle called The Acquirer's Multiple: How the Billionaire Contrarians of Deep Value Beat the Market.
What is The Acquirer’s Multiple?
The Acquirer’s Multiple is a valuation ratio that compares a company’s Earnings Before Interest Taxes Depreciation and Amortisation (EBITDA) to its Enterprise Value.
It thus calculates the cost – EV - an outside investor would have to pay to acquire a company’s operating profits.
How to use the ratio
Available as a screening ratio: No (use it inverse EV to EBITDA)
Available as an output column ratio: Yes
How to select the highest EBITDA to EV companies
To find companies with the highest EBITDA Yield select the EV to EBITDA ratio and set the slider from 0% to 10%.
If Enterprise Value is negative
If the Enterprise Value of a company is negative, a value of 1 is used for calculation purposes. For example if not the EBIT / EV ratio would be a negative number.
We did this after the 2008 financial crisis. We were screening for deep value stocks at the time, and setting EV to 1 instead of NULL meant that securities with negative enterprise value would show up with extremely high ratios rather than disappeared from the screen.
The downside is that for companies with negative enterprise values you may for example see extremely high Free Cash Flow Yield (FCF/EV) or Earnings Yield (EBIT/EV) percentages – you are dividing with one).
The upside is that it makes it immediately obvious to you that you are looking at a negative Enterprise Value company.
This is exactly what you want as a deep value investor.
Click here to start using EBITDA Yield (the Acquirer’s Multiple) in your portfolio NOW!