How do you read EBITDA?

It is used to compare companies with different debt and different taxes. It is not cash: it ignores that equipment has to be replaced one day. For capital-heavy companies it can look much better than the cash flow does.

EBITDA

Profitability

Earnings before interest, taxes, depreciation and amortisation: what the operations earn before financing costs and wear.

How it is worked out

Operating income (EBIT) plus the depreciation of equipment and the amortisation of intangible assets.

How to read it

It is used to compare companies with different debt and different taxes.
It is not cash: it ignores that equipment has to be replaced one day. For capital-heavy companies it can look much better than the cash flow does.

Example

Operating income of $300m and $100m of depreciation: EBITDA of $400m.

Related terms

The other pages on US stocks, free to read. On the company pages, the last three fiscal years are open to everyone, five with a free account, and every year with Ploutos Investor.

US stocksThe market today, the sectors, the largest companies and the week's results.The market's sectorsThe 11 sectors side by side: returns, share of the market, median P/E and dividend.Compare stocksTwo companies side by side: price over up to ten years, with and without dividends, and every figure.US dividend stocksEach dividend's yield next to whether the company's cash covers it and whether it was ever cut.

Explanations of terms for learning, with examples from SEC filings.