Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Kraft Heinz Co., EBITDA calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The financial performance from 2015 through 2019 is characterized by an initial growth phase, a severe contraction in 2018, and a subsequent return to profitability in 2019.
- EBITDA Growth and Volatility
- Earnings before interest, tax, depreciation and amortization (EBITDA) showed a strong upward trend between 2015 and 2017, increasing from $3,074 million to a peak of $7,800 million. This progression was followed by a catastrophic decline in 2018, where EBITDA fell to negative $9,054 million. A recovery occurred in 2019, with EBITDA returning to a positive $5,016 million, though this remains below the levels seen in 2016 and 2017.
- Correlation Across Profitability Metrics
- A high degree of correlation is observed between EBITDA and other earnings metrics. The synchronized collapse of EBIT, EBT, and Net Income in 2018 suggests that the negative EBITDA was driven by significant losses that permeated every level of the income statement. The divergence in 2017, where Net Income ($10,999 million) significantly exceeded EBITDA ($7,800 million), indicates the presence of substantial non-operating gains or one-time tax benefits during that fiscal year.
- Operational Stability and Non-Cash Charges
- The variance between EBITDA and EBIT serves as a proxy for depreciation and amortization expenses. This variance remained relatively stable across the five-year period, fluctuating between $740 million and $1,337 million. The relative stability of these non-cash charges, contrasted with the extreme volatility of the EBITDA figure, indicates that the fluctuations in profitability were driven by operational outcomes or impairment charges rather than changes in the company's asset depreciation schedule.
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Enterprise Value to EBITDA Ratio, Current
Kraft Heinz Co., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 69,123) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 5,016) |
| Valuation Ratio | |
| EV/EBITDA | 13.78 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Coca-Cola Co. | 21.90 |
| Mondelēz International Inc. | 18.45 |
| PepsiCo Inc. | 13.86 |
| Philip Morris International Inc. | 18.87 |
Based on: 10-K (reporting date: 2019-12-28).
1 Click competitor name to see calculations.
If the company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.
Otherwise, if the company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.
Enterprise Value to EBITDA Ratio, Historical
Kraft Heinz Co., historical EV/EBITDA calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 59,922) | 65,217) | 116,405) | 141,537) | 114,624) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 5,016) | (9,054) | 7,800) | 7,494) | 3,074) | |
| Valuation Ratio | ||||||
| EV/EBITDA3 | 11.95 | — | 14.92 | 18.89 | 37.29 | |
| Benchmarks | ||||||
| EV/EBITDA, Competitors4 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
3 2019 Calculation
EV/EBITDA = EV ÷ EBITDA
= 59,922 ÷ 5,016 = 11.95
4 Click competitor name to see calculations.
The financial performance and valuation of the entity between 2015 and 2019 exhibit significant volatility, characterized by a sharp contraction in enterprise value and a highly unstable earnings profile.
- Enterprise Value (EV) Trends
- A peak in enterprise value was reached on December 31, 2016, at 141,537 million USD. Following this peak, a consistent downward trajectory was observed, with the value falling to 116,405 million USD in 2017, 65,217 million USD in 2018, and ultimately 59,922 million USD by December 28, 2019. This represents a total decline of approximately 57.6% from the 2016 peak.
- EBITDA Performance
- Earnings before interest, tax, depreciation and amortization showed initial growth, rising from 3,074 million USD in 2015 to 7,800 million USD in 2017. A severe reversal occurred in 2018, where EBITDA plummeted to negative 9,054 million USD. A partial recovery followed in 2019, with EBITDA returning to a positive 5,016 million USD.
- EV/EBITDA Ratio Analysis
- The valuation multiple experienced a sustained contraction throughout the analyzed period. The ratio began at 37.29 in 2015 and declined to 18.89 in 2016 and 14.92 in 2017. A ratio was not applicable for 2018 due to the negative EBITDA. By 2019, the ratio further compressed to 11.95, indicating a substantial reduction in the market's valuation of the company relative to its operational earnings capacity.
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