Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
HP Inc., EBITDA calculation
US$ in millions
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
A comprehensive review of the financial performance from 2013 to 2018 reveals a sustained decline in operational profitability metrics, contrasted by significant volatility in net earnings. While core operational earnings decreased steadily over the period, the final net result in the last reported year shows a sharp divergence from operating trends.
- EBITDA Trend
- Earnings before interest, tax, depreciation, and amortization experienced a consistent downward trajectory, falling from 11,547 million US$ in 2013 to 3,853 million US$ in 2018. The most pronounced contraction occurred between 2015 and 2016, where the value decreased by approximately 52%.
- Operational Earnings (EBIT and EBT)
- Both EBIT and EBT followed a pattern of attrition similar to EBITDA. EBIT declined from 6,936 million US$ in 2013 to 3,325 million US$ in 2018, indicating a reduction in profitability before the impact of financial structure and taxes. EBT mirrored this decline, moving from 6,510 million US$ in 2013 to 3,013 million US$ in 2018.
- Net Earnings Divergence
- Net earnings exhibited high volatility, dipping to 2,496 million US$ in 2016 before surging to a period high of 5,327 million US$ in 2018. This recovery in the bottom line is notable because it occurred despite the continued decline in EBITDA, EBIT, and EBT, suggesting the influence of non-operating income, extraordinary gains, or tax adjustments in the 2018 fiscal year.
- Depreciation and Amortization Impact
- The margin between EBITDA and EBIT narrowed significantly over the six-year period. In 2013, the difference was 4,611 million US$, whereas by 2018, the difference reduced to 528 million US$, indicating a substantial decrease in annual depreciation and amortization expenses.
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Enterprise Value to EBITDA Ratio, Current
HP Inc., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 27,629) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 3,853) |
| Valuation Ratio | |
| EV/EBITDA | 7.17 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Apple Inc. | 34.78 |
| Arista Networks Inc. | 57.78 |
| Cisco Systems Inc. | 21.69 |
| Dell Technologies Inc. | 31.88 |
| Lumentum Holdings Inc. | — |
| Super Micro Computer Inc. | 11.13 |
Based on: 10-K (reporting date: 2018-10-31).
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
HP Inc., historical EV/EBITDA calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Enterprise value (EV)1 | 35,448) | 34,944) | 27,000) | 29,583) | 77,821) | 64,390) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 3,853) | 3,939) | 4,366) | 9,120) | 11,235) | 11,547) | |
| Valuation Ratio | |||||||
| EV/EBITDA3 | 9.20 | 8.87 | 6.18 | 3.24 | 6.93 | 5.58 | |
| Benchmarks | |||||||
| EV/EBITDA, Competitors4 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
3 2018 Calculation
EV/EBITDA = EV ÷ EBITDA
= 35,448 ÷ 3,853 = 9.20
4 Click competitor name to see calculations.
The financial trajectory between 2013 and 2018 is characterized by a significant contraction in operational earnings and substantial volatility in enterprise valuation. While both enterprise value and EBITDA ended the period lower than their initial 2013 levels, the valuation multiple expanded significantly in the latter half of the period.
- Enterprise Value Trends
- Enterprise value experienced a peak in October 2014 at 77,821 million USD, followed by a sharp decline to 29,583 million USD by October 2015. After this correction, the value stabilized and entered a moderate recovery phase, ascending to 35,448 million USD by October 2018.
- EBITDA Performance
- A persistent downward trend is observed in EBITDA, which fell from 11,547 million USD in 2013 to 3,853 million USD in 2018. The most acute decline occurred between 2015 and 2016, during which earnings before interest, tax, depreciation, and amortization decreased by approximately 52%.
- EV/EBITDA Ratio Dynamics
- The EV/EBITDA ratio fluctuated significantly, reaching a period low of 3.24 in 2015. Subsequently, the ratio climbed steadily each year, reaching 9.20 by October 2018. This upward trend in the multiple, occurring simultaneously with declining EBITDA, indicates that the enterprise value did not contract at the same rate as operational earnings, leading to a higher relative valuation of the business over time.
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