Individual Stocks

Price / Earnings Ratios and Other Calculations

Why is EBITDA sometimes perceived as an unreliable metric to evaluate a company?

It may be unreliable because it does not give a clear picture of a company’s cash flows, and also does not take into consideration the capital required to run the business, or capital required to replace large capital items that companies often need to upgrade their operations. The public disclosure of EBITDA by a publicly listed company is not required by the SEC.


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