Enterprise Value to EBITDA (EV/EBITDA)
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McKesson Corp. pages available for free this week:
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
McKesson Corp., EBITDA calculation
US$ in millions
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
- Net Income Attributable to McKesson Corporation
- The net income shows a generally positive trend over the six-year period. Starting at 1,202 million USD in 2011, it increased to 1,403 million USD in 2012, followed by a slight decline in 2013 and 2014 to 1,338 million USD and 1,263 million USD respectively. However, a recovery and significant growth occurred in 2015 and 2016, reaching 1,476 million USD and then surging to 2,258 million USD, marking a robust increase by the end of the observed period.
- Earnings Before Tax (EBT)
- EBT consistently rises throughout the timeframe. Beginning at 1,635 million USD in 2011, it experiences steady annual increases, reaching 1,919 million USD in both 2012 and 2013, then climbing further to 2,096 million USD in 2014. This upward trajectory continues, with 2,657 million USD in 2015 and 3,250 million USD in 2016, indicating improving profitability before tax expenses.
- Earnings Before Interest and Tax (EBIT)
- EBIT displays a pattern similar to EBT, with a continuous increase each year. From 1,857 million USD in 2011, EBIT rises to 2,170 million USD in 2012 and slightly decreases to 2,159 million USD in 2013. After that, it picks up pace, ascending to 2,399 million USD in 2014, 3,031 million USD in 2015, and culminating at 3,603 million USD in 2016. This indicates enhanced operational efficiency and profitability before interest and tax deductions.
- Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA)
- EBITDA shows a strong growth trend over the period. Initially, it stands at 2,353 million USD in 2011, increasing steadily to 2,721 million USD in 2012 and 2,750 million USD in 2013. The upward momentum continues with 3,103 million USD in 2014, followed by a more pronounced increase to 4,048 million USD in 2015, and finally reaching 4,488 million USD in 2016. This growth reflects not only improved earnings but also operational cash flow strength before accounting for non-cash expenses.
Enterprise Value to EBITDA Ratio, Current
McKesson Corp., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | |
| Valuation Ratio | |
| EV/EBITDA | |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Abbott Laboratories | |
| CVS Health Corp. | |
| Elevance Health Inc. | |
| Intuitive Surgical Inc. | |
| Medtronic PLC | |
| UnitedHealth Group Inc. | |
Based on: 10-K (reporting date: 2016-03-31).
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
McKesson Corp., historical EV/EBITDA calculation, comparison to benchmarks
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Enterprise value (EV)1 | |||||||
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | |||||||
| Valuation Ratio | |||||||
| EV/EBITDA3 | |||||||
| Benchmarks | |||||||
| EV/EBITDA, Competitors4 | |||||||
| Abbott Laboratories | |||||||
| CVS Health Corp. | |||||||
| Elevance Health Inc. | |||||||
| Intuitive Surgical Inc. | |||||||
| Medtronic PLC | |||||||
| UnitedHealth Group Inc. | |||||||
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
3 2016 Calculation
EV/EBITDA = EV ÷ EBITDA
= ÷ =
4 Click competitor name to see calculations.
The analysis of the provided financial data reveals significant fluctuations in both enterprise value and EBITDA over the six-year period. Initially, the enterprise value exhibits a moderate increase from 21,278 million USD in 2011 to 27,034 million USD in 2013, followed by a substantial jump, peaking at 57,740 million USD in 2015 before declining to 43,051 million USD in 2016. This pattern suggests a period of aggressive growth or acquisition activity culminating in 2015, with a subsequent contraction or market correction in the following year.
EBITDA shows a consistent upward trend throughout the timeframe, growing from 2,353 million USD in 2011 to 4,488 million USD in 2016. This steady increase in earnings before interest, tax, depreciation, and amortization indicates improving operational profitability and potentially enhanced efficiency or expansion of business activities.
The EV/EBITDA ratio, a key valuation metric, demonstrates considerable volatility. Beginning at 9.04 in 2011, the ratio decreases to 8.11 in 2012, rises sharply to its highest point of 15.92 in 2014, then gradually declines to 9.59 by 2016. This fluctuation reflects changing market perceptions of value relative to earnings. The peak ratio in 2014 suggests the enterprise value was significantly higher relative to EBITDA, possibly driven by investor optimism or anticipated future growth at that time. The subsequent decline indicates either an adjustment in valuation or improved earnings performance narrowing the ratio.
- Enterprise Value Trend
- Moderate growth from 2011 to 2013, sharp increase in 2014-2015, decline in 2016.
- EBITDA Trend
- Consistent growth across all years, nearly doubling from 2011 to 2016.
- EV/EBITDA Ratio
- Volatile, with a notable peak in 2014, indicating fluctuating market valuation relative to earnings.
Overall, the data suggests an improving earnings base accompanied by fluctuating market valuation, with a significant valuation peak around 2014-2015. The correction in enterprise value alongside continued EBITDA growth in 2016 may indicate stabilization or market reassessment of the company's value.