Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The financial data over the five-year period reveals several notable trends in profit metrics. Net income attributable to the company exhibited significant volatility, starting at a high in 2015, then sharply declining in 2016 and further plunging in 2017. There was a partial recovery in 2018, but net income dropped dramatically again in 2019.
Similar patterns are observed in earnings before tax (EBT), which began at its peak in 2015 before declining steeply in 2016 and reaching a low in 2017. A notable rebound occurred in 2018, followed by a negative value in 2019, indicating losses before tax in the final year examined.
Earnings before interest and tax (EBIT) mirrored the overall trend of earnings and income, starting robustly in 2015, falling significantly through 2016 and 2017, bouncing back in 2018, but once again falling to a very low level in 2019. EBIT values in 2019 represented a minuscule fraction compared to 2015.
EBITDA followed a somewhat different trajectory in that despite declining from the opening year, the drop between 2017 and 2019 was less pronounced than in other earnings metrics. EBITDA showed recovery in 2018, albeit not matching 2015 levels, and then decreased sharply in 2019 to levels below those recorded in 2016 and 2017.
- Summary of Trends
- All profitability measures peaked in 2015 and experienced declines through 2017.
- 2018 saw a recovery across all key earnings indicators, suggesting improved operational performance or favorable conditions that year.
- 2019 was marked by severe declines, including a negative EBT, indicating losses before tax and potential operational or exceptional challenges.
- The volatility in net income and earnings indicates variability in profitability and potentially increasing risks or one-off events influencing the results.
- Despite fluctuations, EBITDA generally maintained higher absolute values than EBIT, reflecting the impact of depreciation and amortization on operating profits.
Enterprise Value to EBITDA Ratio, Current
Selected Financial Data (US$ in millions) | |
Enterprise value (EV) | 55,738) |
Earnings before interest, tax, depreciation and amortization (EBITDA) | 3,389) |
Valuation Ratio | |
EV/EBITDA | 16.45 |
Benchmarks | |
EV/EBITDA, Competitors1 | |
Linde plc | 18.42 |
Sherwin-Williams Co. | 21.35 |
Based on: 10-K (reporting date: 2019-12-31).
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
Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Enterprise value (EV)1 | 55,738) | 67,539) | 77,054) | 40,369) | 30,575) | |
Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 3,389) | 12,915) | 6,244) | 8,133) | 13,397) | |
Valuation Ratio | ||||||
EV/EBITDA3 | 16.45 | 5.23 | 12.34 | 4.96 | 2.28 | |
Benchmarks | ||||||
EV/EBITDA, Competitors4 | ||||||
Linde plc | — | — | — | — | — | |
Sherwin-Williams Co. | — | — | — | — | — |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
3 2019 Calculation
EV/EBITDA = EV ÷ EBITDA
= 55,738 ÷ 3,389 = 16.45
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value experienced substantial fluctuations over the five-year period. Starting at $30,575 million in 2015, it increased significantly to a peak of $77,054 million in 2017. Following this peak, the value declined steadily to $55,738 million by the end of 2019. This pattern indicates a period of aggressive valuation growth followed by a correction or reduction in the company's overall market valuation.
- Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
- EBITDA showed a declining trend from 2015 through 2017, decreasing from $13,397 million to $6,244 million, reflecting a reduction in operational profitability or cash-generating ability during these years. However, in 2018 EBITDA nearly doubled to $12,915 million, suggesting a significant improvement in earnings performance. This improvement was not sustained, as EBITDA sharply dropped to $3,389 million in 2019, marking the lowest figure in the observed period.
- EV/EBITDA Ratio
- The EV/EBITDA ratio, a key valuation multiple, exhibited high volatility. It increased from a low of 2.28 in 2015 to a peak of 12.34 in 2017, indicating that the enterprise value grew disproportionately relative to EBITDA, potentially signaling an overvaluation or diminishing earnings quality. The ratio then decreased to 5.23 in 2018, corresponding with EBITDA recovery. However, in 2019 it surged to 16.45, the highest level across the time frame, driven primarily by the steep decline in EBITDA relative to enterprise value, which may signal increased valuation risk or deteriorating operational efficiency.
- Overall Insights
- The data reveals a period marked by significant financial volatility. The peak in enterprise value in 2017 coincided with EBITDA declines and a high EV/EBITDA ratio, signifying a potential disconnect between market valuation and operational performance. The transient recovery in EBITDA in 2018 improved the valuation multiple temporarily, but the following year's sharp EBITDA decline resulted in an elevated EV/EBITDA ratio, raising concerns about profitability sustainability and valuation. These trends suggest that while the company's market value varied considerably, underlying earnings showed inconsistency, and valuation multiples became elevated during periods of lower operational earnings.