Amortisation is another kind of Depreciation. All these other items reduce the final profit. Some companies, such as supermarkets, like to show EBITDAR where the “R” is rent. Sainsburys, who own less property and so pay more rent than Tescos, like to compare EBITDAR because it makes them look better. EBIT is profit after D&A but Before Interest and Tax.
EBITDA is the cash profit and actually stands for Earnings Before Interest Tax Depreciation and Amortisation (“D&A”).
The legendary investor and ‘Sage of Omaha’, Warren Buffet, CEO/Chairman of Berkshire Hathaway wrote, in 1986, about the important concept of “owner earnings”.
A question I am frequently asked is how do we analyse stocks? How much emphasis do we place on valuation? And how much do we place on company analysis, in terms of assessing quality and growth…
A core method we, as equity analysts, use to calculate and estimate the present value of the companies we invest into on behalf of clients is the discounted cash flow model (DCF).
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