Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Trane Technologies plc, 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).
A comprehensive analysis of the financial performance from 2018 to 2022 reveals a overall upward trajectory in earnings, characterized by a significant contraction in 2020 followed by a robust recovery. EBITDA reached its highest point in the five-year period by the end of 2022, suggesting a strengthening of core operational profitability.
- EBITDA Trend and Volatility
- EBITDA exhibited steady growth between 2018 and 2019, rising from 2,242,500 thousand to 2,382,000 thousand. A sharp decline occurred in 2020, with EBITDA falling to 1,831,200 thousand, representing a decrease of approximately 23% compared to the previous year. This downturn was followed by a strong recovery phase; by 2021, EBITDA returned to 2,323,800 thousand, and by 2022, it peaked at 2,719,200 thousand, marking a 21% increase over the 2018 baseline.
- Operational Earnings Analysis (EBIT and EBT)
- The trends observed in EBIT and EBT closely mirror the movement of EBITDA, indicating that the drivers of profitability were primarily operational rather than the result of changes in depreciation or interest structures. EBIT grew from 1,881,000 thousand in 2018 to 2,395,600 thousand in 2022. The delta between EBITDA and EBIT suggests that depreciation and amortization expenses remained relatively stable over the period, fluctuating between approximately 294 million and 397 million.
- Net Earnings Conversion and Profitability
- Net earnings attributable to the company showed higher volatility than EBITDA. In 2020, net earnings dropped to 854,900 thousand, a more severe percentage decline than that seen in EBITDA, suggesting that fixed costs or non-operating expenses exerted more pressure on the bottom line during the downturn. However, the recovery was pronounced, with net earnings reaching 1,756,500 thousand in 2022. The conversion rate from EBITDA to net earnings improved significantly toward the end of the period, indicating enhanced efficiency in managing taxes and interest expenses relative to operational cash flow.
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Enterprise Value to EBITDA Ratio, Current
Trane Technologies plc, current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 44,166,336) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 2,719,200) |
| Valuation Ratio | |
| EV/EBITDA | 16.24 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Boeing Co. | 24.63 |
| Caterpillar Inc. | 28.51 |
| Eaton Corp. plc | 29.13 |
| GE Aerospace | 28.82 |
| Honeywell International Inc. | 10.98 |
| Lockheed Martin Corp. | 15.75 |
| RTX Corp. | 19.24 |
| EV/EBITDA, Sector | |
| Capital Goods | 32.72 |
| EV/EBITDA, Industry | |
| Industrials | 24.99 |
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
Trane Technologies plc, 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 | 45,585,145) | 39,358,574) | 36,743,046) | 38,875,598) | 28,354,995) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 2,719,200) | 2,323,800) | 1,831,200) | 2,382,000) | 2,242,500) | |
| Valuation Ratio | ||||||
| EV/EBITDA3 | 16.76 | 16.94 | 20.07 | 16.32 | 12.64 | |
| Benchmarks | ||||||
| EV/EBITDA, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 13.86 | 12.43 | — | — | — | |
| Eaton Corp. plc | 19.18 | 17.06 | — | — | — | |
| GE Aerospace | 14.82 | 95.57 | — | — | — | |
| Honeywell International Inc. | 18.01 | 15.57 | — | — | — | |
| Lockheed Martin Corp. | 14.98 | 11.97 | — | — | — | |
| RTX Corp. | 14.92 | 15.48 | — | — | — | |
| EV/EBITDA, Sector | ||||||
| Capital Goods | 19.01 | 19.87 | — | — | — | |
| EV/EBITDA, Industry | ||||||
| Industrials | 16.46 | 16.30 | — | — | — | |
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
= 45,585,145 ÷ 2,719,200 = 16.76
4 Click competitor name to see calculations.
The financial trajectory from 2018 to 2022 is characterized by a significant expansion in enterprise value and a fluctuating operational earnings profile, leading to a notable shift in the valuation multiple.
- Enterprise Value (EV) Trend
- A consistent upward trend is observed in the enterprise value, which grew from 28.35 billion US dollars in 2018 to 45.59 billion US dollars by 2022. Despite a marginal contraction in 2020, the overall period reflects a substantial increase in the market's valuation of the entity.
- EBITDA Performance
- Earnings before interest, tax, depreciation, and amortization exhibited volatility during the period. After an initial increase in 2019, EBITDA experienced a significant decline in 2020, dropping to 1.83 billion US dollars. However, a strong recovery followed, with earnings reaching a period high of 2.72 billion US dollars in 2022.
- EV/EBITDA Ratio Analysis
- The EV/EBITDA ratio increased from 12.64 in 2018 to a peak of 20.07 in 2020. This peak was the result of a simultaneous increase in enterprise value and a decrease in EBITDA, suggesting a period of valuation expansion or temporary operational compression. In the subsequent two years, the ratio stabilized, ending at 16.76 in 2022, which indicates that EBITDA growth began to align more closely with the growth in enterprise value.
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