EBITDA = earnings before interest, tax, depreciation and amortization. It is a proxy for cash flow, but not a perfect substitute, especially for capital intensive businesses. The preferable metric in my view is EBIT, which would take into account the capex requirements of the business, but you always have to be mindful of potential lumpiness of capital outlays which may not be perfectly reflected in D&A. Why does this matter, and who cares? I expect cash flows (sats flows) are going to become more important than they have been in recent history. Sounds business models with sustainable profitability will be the focus.
Discussion
Changes in net working capital not to be neglected either
Might as well just use EBITDA less CapEx spend. Can’t properly assess a business for having to include depreciation and amort in expenses for non-actual cash outlays.
Sound business models is the way.
It will be nice to see the game of marketing for hype, to collect and sell users go away.
Tired of evaluating software (demos) and seeing the same old VC pitch deck.
1. We are global 24x7 company having grown from xxx to x,xxx in 3 yrs
2. Here’s our top logos and we’ve taken x rounds of funding and xxx VC has a war chest behind us that we’ve plowed in to development and building a world class product… (never said, but the reality - the latest investor is the one w/ the most desire to flip in 1-2yrs).
3. And finally, you get to hear 10 minutes on what the thing actually does.