Thanks for that! One question here about the metric EV\NOPAT. In the different writes-up you seem to always using EV / NOPAT instead of the more common P\E ratio. I am aware of how these 2 different metrics are constructed, but is there something deeper in it? A difference at let´s say principle level.? It is very common to see P\E ratio whereas EV\NOPAT would required hand-made calculation which would be OK if there is a real benefit of using EV\NOPAT instead of P\E ratio.
Do you know any stock screener\free Software that provides EV\NOPAT directly?
Thanks for the question! Apologies for the delayed answer.
P/E doesn't reflect the true underlying capital intensity of a business when the reported income figure is heavily influenced by non-cash amortization expenses on acquisition-related intangibles. So companies that are acquisitive, engaged in a big merger... will look expensive at first sight. Also, smaller companies oftentimes invest heavily in new capacity which increases their depreciation expenses but does not reflect the underlying maintenance investments required. Think of Sanlorenzo and the one-off investments in plant construction, long-lasting equipment. Depreciation charges make us believe the business is capital-intensive but really that isn't the case when look you at the underlying recurring industrial CAPEX at 0.5%-0.75% of net revenues new yachts.
NOPAT is kind of your free cash flow that can be distributed back to shareholders and it excludes the interest charges or interest income as those financial items are a consequence of past allocation decisions. NOPAT is thus the cash a company is able to generate in a steady-state (no revenue growth, no growth investments), regardless of how its operations are currently being financed.
I have a preference for EV/enterprise value over market cap as I'd like to include all debt items: non-controlling interests, lease liabilities, preferred dividend...
Thanks for that! One question here about the metric EV\NOPAT. In the different writes-up you seem to always using EV / NOPAT instead of the more common P\E ratio. I am aware of how these 2 different metrics are constructed, but is there something deeper in it? A difference at let´s say principle level.? It is very common to see P\E ratio whereas EV\NOPAT would required hand-made calculation which would be OK if there is a real benefit of using EV\NOPAT instead of P\E ratio.
Do you know any stock screener\free Software that provides EV\NOPAT directly?
Thanks for the question! Apologies for the delayed answer.
P/E doesn't reflect the true underlying capital intensity of a business when the reported income figure is heavily influenced by non-cash amortization expenses on acquisition-related intangibles. So companies that are acquisitive, engaged in a big merger... will look expensive at first sight. Also, smaller companies oftentimes invest heavily in new capacity which increases their depreciation expenses but does not reflect the underlying maintenance investments required. Think of Sanlorenzo and the one-off investments in plant construction, long-lasting equipment. Depreciation charges make us believe the business is capital-intensive but really that isn't the case when look you at the underlying recurring industrial CAPEX at 0.5%-0.75% of net revenues new yachts.
NOPAT is kind of your free cash flow that can be distributed back to shareholders and it excludes the interest charges or interest income as those financial items are a consequence of past allocation decisions. NOPAT is thus the cash a company is able to generate in a steady-state (no revenue growth, no growth investments), regardless of how its operations are currently being financed.
I have a preference for EV/enterprise value over market cap as I'd like to include all debt items: non-controlling interests, lease liabilities, preferred dividend...