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A company had total revenues of $40 million, operating margin of 36.7%, and depreciation and amortization...

A company had total revenues of $40 million, operating margin of 36.7%, and depreciation and amortization expense of $14 million over the trailing twelve months. The company currently has $287 million in total debt and $76 million in cash and cash equivalents. The company's shares are currently trading at $29.4 per share and there are 19 million shares outstanding. What is its EV/EBITDA ratio? Round to one decimal place.

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Answer #1

EV/EBITDA ratio is computed as shown below:

EBITDA will be as follows:

= (Total revenues x operating margin) + depreciation and amortization

= ($ 40 million x 36.7%) + $ 14 million

= $ 14.68 million + $ 14 million

= $ 28.68 million

EV is computed as shown below:

= (Price per share x Number of shares) + value of debt - cash and cash equivalents

= $ 29.4 x 19 million + $ 287 million - $ 76 million

= $ 558.6 million + $ 211 million

= $ 769.6 million

So, the ratio is:

= $ 769.6 million / $ 28.68 million

= 26.8 Approximately

Feel free to ask in case of any query relating to this question    

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