Microsoft Excel LibreOffice Calc

Enterprise Value to EBITDA (EV/EBITDA)

Difficulty: Intermediate


Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)

Automatic Data Processing Inc., EBITDA calculation

USD $ in thousands

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12 months ended Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
Net earnings 1,620,800  1,733,400  1,492,500  1,452,500  1,515,900  1,405,800 
Less: Net earnings (loss) from discontinued operations –  –  (900) 76,000  13,300  41,700 
Add: Income tax expense 550,300  797,700  741,300  694,200  772,000  720,200 
Earnings before tax (EBT) 2,171,100  2,531,100  2,234,700  2,070,700  2,274,600  2,084,300 
Add: Interest expense 102,700  80,000  56,200  6,500  6,100  9,100 
Earnings before interest and tax (EBIT) 2,273,800  2,611,100  2,290,900  2,077,200  2,280,700  2,093,400 
Add: Depreciation and amortization 377,600  316,100  288,600  277,900  336,200  317,000 
Earnings before interest, tax, depreciation and amortization (EBITDA) 2,651,400  2,927,200  2,579,500  2,355,100  2,616,900  2,410,400 

Based on: 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08), 10-K (filing date: 2013-08-19).

Item Description The company
EBITDA To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital. Automatic Data Processing Inc.'s EBITDA increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

Enterprise Value to EBITDA Ratio, Current

Automatic Data Processing Inc., current EV/EBITDA calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in thousands)
Enterprise value (EV) 63,982,098 
Earnings before interest, tax, depreciation and amortization (EBITDA) 2,651,400 
Ratio
EV/EBITDA 24.13
Benchmarks
EV/EBITDA, Competitors
Accenture PLC 14.92
EV/EBITDA, Sector
Support Services 19.79
EV/EBITDA, Industry
Industrials 14.66

Based on: 10-K (filing date: 2018-08-03).

If company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.

Otherwise, if company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.


Enterprise Value to EBITDA Ratio, Historical

Automatic Data Processing Inc., historical EV/EBITDA calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
Selected Financial Data (USD $ in thousands)
Enterprise value (EV)1 58,645,010  48,720,904  39,721,987  35,769,795  39,212,490  33,276,479 
Earnings before interest, tax, depreciation and amortization (EBITDA)2 2,651,400  2,927,200  2,579,500  2,355,100  2,616,900  2,410,400 
Ratio
EV/EBITDA3 22.12 16.64 15.40 15.19 14.98 13.81
Benchmarks
EV/EBITDA, Competitors
Accenture PLC 13.79 15.98 11.03 12.95 9.52 9.05
EV/EBITDA, Sector
Support Services 16.21 12.29 13.66 11.42 10.61
EV/EBITDA, Industry
Industrials 15.26 13.29 11.89 11.61 11.16

Based on: 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07), 10-K (filing date: 2014-08-08), 10-K (filing date: 2013-08-19).

2018 Calculations

3 EV/EBITDA = EV ÷ EBITDA
= 58,645,010 ÷ 2,651,400 = 22.12

Ratio Description The company
EV/EBITDA EV/EBITDA is a valuation indicator for the overall company rather than common stock. Automatic Data Processing Inc.'s EV/EBITDA ratio increased from 2016 to 2017 and from 2017 to 2018.