Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Hershey Co., EBITDA calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
An analysis of the financial performance from 2018 to 2022 reveals a consistent upward trajectory in core earnings capacity. While a marginal decrease was noted in 2019, subsequent years show accelerated growth across all key profitability metrics, culminating in a peak in 2022.
- EBITDA Growth Trend
- Earnings before interest, tax, depreciation and amortization experienced an overall increase of approximately 31.5% over the five-year period. The value rose from 1,852,063 thousand US$ in 2018 to 2,436,125 thousand US$ in 2022. The most significant expansion occurred between 2020 and 2021, where a year-over-year increase of approximately 15.3% was recorded.
- Operational Profitability Correlation
- A strong positive correlation is observed between EBITDA, EBIT, and EBT. All three metrics followed an identical trajectory: a slight contraction in 2019 followed by three consecutive years of expansion. This alignment indicates that the growth in EBITDA was driven by fundamental operating performance that translated effectively into earnings before tax.
- Depreciation and Amortization Dynamics
- The variance between EBITDA and EBIT remained relatively stable from 2018 through 2020, fluctuating within a narrow range of approximately 291 million to 295 million US$. However, a notable increase in depreciation and amortization is evident in 2021 and 2022, with the delta reaching 378,959 thousand US$ by the end of 2022. This trend suggests an expansion of the asset base or increased capital expenditure during the latter portion of the period.
- Net Income Conversion
- Net income attributable to the company mirrored the growth patterns of the operational metrics, increasing from 1,177,562 thousand US$ in 2018 to 1,644,817 thousand US$ in 2022. This represents a total growth of approximately 39.6%. The fact that net income growth slightly outperformed EBITDA growth indicates potential improvements in tax efficiency or a reduction in interest expenses relative to operating earnings.
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Enterprise Value to EBITDA Ratio, Current
Hershey Co., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 52,082,977) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 2,436,125) |
| Valuation Ratio | |
| EV/EBITDA | 21.38 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Coca-Cola Co. | 21.90 |
| Mondelēz International Inc. | 18.45 |
| PepsiCo Inc. | 13.86 |
| Philip Morris International Inc. | 18.87 |
| EV/EBITDA, Sector | |
| Food, Beverage & Tobacco | 22.35 |
| EV/EBITDA, Industry | |
| Consumer Staples | 23.01 |
Based on: 10-K (reporting date: 2022-12-31).
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
Hershey Co., historical EV/EBITDA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 53,436,870) | 46,279,575) | 34,804,244) | 37,362,005) | 26,861,195) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 2,436,125) | 2,242,072) | 1,943,375) | 1,824,450) | 1,852,063) | |
| Valuation Ratio | ||||||
| EV/EBITDA3 | 21.94 | 20.64 | 17.91 | 20.48 | 14.50 | |
| Benchmarks | ||||||
| EV/EBITDA, Competitors4 | ||||||
| Coca-Cola Co. | 20.83 | 19.52 | — | — | — | |
| Mondelēz International Inc. | 21.64 | 15.62 | — | — | — | |
| PepsiCo Inc. | 18.63 | 18.42 | — | — | — | |
| Philip Morris International Inc. | 14.78 | 13.64 | — | — | — | |
| EV/EBITDA, Sector | ||||||
| Food, Beverage & Tobacco | 18.49 | 17.05 | — | — | — | |
| EV/EBITDA, Industry | ||||||
| Consumer Staples | 16.42 | 15.65 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
3 2022 Calculation
EV/EBITDA = EV ÷ EBITDA
= 53,436,870 ÷ 2,436,125 = 21.94
4 Click competitor name to see calculations.
The financial trajectory from 2018 to 2022 is characterized by a substantial expansion in enterprise valuation that significantly outpaced the growth of operational earnings.
- Enterprise Value (EV) Progression
- A strong upward trend is observed in the enterprise value, which rose from US$ 26,861,195 thousand in 2018 to US$ 53,436,870 thousand in 2022. This represents a near doubling of the total value over the five-year period.
- EBITDA Performance
- Earnings before interest, tax, depreciation, and amortization demonstrated steady, incremental growth. EBITDA increased from US$ 1,852,063 thousand in 2018 to US$ 2,436,125 thousand in 2022, reflecting a consistent ability to generate operational cash flow, albeit at a slower rate than the increase in enterprise value.
- EV/EBITDA Ratio Dynamics
- The EV/EBITDA ratio experienced notable volatility with an overall increasing trend. After starting at 14.50 in 2018, the ratio spiked to 20.48 in 2019 before correcting to 17.91 in 2020. A subsequent recovery saw the ratio rise to 20.64 in 2021 and peak at 21.94 in 2022.
The divergence between the rapid acceleration of the enterprise value and the moderate growth of EBITDA resulted in a general expansion of the valuation multiple. This trend indicates that the market has applied a higher premium to the earnings over the analyzed period, moving from a multiple of 14.50x to 21.94x.
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