Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Reynolds American Inc., EBITDA calculation
US$ in millions
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The EBITDA of Reynolds American Inc. exhibited a significant upward trajectory over the five-year period from 2012 to 2016, characterized by an initial period of volatility followed by substantial exponential growth.
- EBITDA Growth Trends
- Between 2012 and 2013, EBITDA increased from US$ 2,318 million to US$ 3,103 million, before experiencing a moderate decline to US$ 2,654 million in 2014. However, a sharp acceleration occurred starting in 2015, with EBITDA rising to US$ 7,076 million and reaching US$ 10,440 million by 2016. This represents a total increase of approximately 348% from the 2012 baseline.
- Operating Metric Correlation
- A consistent correlation is observed between EBITDA and Earnings Before Interest and Tax (EBIT). The difference between these two figures remained relatively stable throughout the period, suggesting that depreciation and amortization expenses were constant and did not scale in proportion to the surge in overall earnings. This indicates that the growth was driven by operational performance rather than changes in asset depreciation schedules.
- Bottom-Line Impact
- The growth pattern in EBITDA is mirrored across all other profit metrics. Net income followed a similar trajectory, increasing from US$ 1,272 million in 2012 to US$ 6,073 million in 2016. The substantial expansion of EBITDA from 2014 to 2016 directly contributed to the corresponding growth in Earnings Before Tax (EBT) and final net profitability, demonstrating a high degree of transmission from operational earnings to the bottom line.
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Enterprise Value to EBITDA Ratio, Current
Reynolds American Inc., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 103,094) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 10,440) |
| Valuation Ratio | |
| EV/EBITDA | 9.87 |
| 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: 2016-12-31).
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
Reynolds American Inc., historical EV/EBITDA calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 97,440) | 83,957) | 41,466) | 29,415) | 26,890) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 10,440) | 7,076) | 2,654) | 3,103) | 2,318) | |
| Valuation Ratio | ||||||
| EV/EBITDA3 | 9.33 | 11.87 | 15.62 | 9.48 | 11.60 | |
| Benchmarks | ||||||
| EV/EBITDA, Competitors4 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
3 2016 Calculation
EV/EBITDA = EV ÷ EBITDA
= 97,440 ÷ 10,440 = 9.33
4 Click competitor name to see calculations.
The financial trajectory between 2012 and 2016 is characterized by substantial expansion in both Enterprise Value (EV) and Earnings before interest, tax, depreciation and amortization (EBITDA), accompanied by significant fluctuations in the valuation multiple.
- Enterprise Value Trends
- A consistent and aggressive upward trend in Enterprise Value is observed, increasing from US$ 26,890 million in 2012 to US$ 97,440 million in 2016. A sharp inflection point occurred between 2014 and 2015, during which the Enterprise Value more than doubled, rising from US$ 41,466 million to US$ 83,957 million.
- EBITDA Growth Patterns
- Operational earnings exhibited an overall growth trajectory, rising from US$ 2,318 million in 2012 to US$ 10,440 million in 2016. Although a moderate decline was recorded in 2014, where EBITDA fell to US$ 2,654 million, this was followed by a period of rapid acceleration in 2015 and 2016.
- EV/EBITDA Ratio Interpretation
- The EV/EBITDA ratio demonstrated notable volatility, peaking at 15.62 in 2014. This peak corresponds with the period of lowest EBITDA performance relative to the increasing Enterprise Value. Following 2014, the ratio entered a downward trend, reaching 9.33 by 2016. This compression of the multiple indicates that the growth in EBITDA outpaced the growth in Enterprise Value during the latter part of the period, leading to a more favorable valuation relative to earnings.
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