Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Kraft Foods Group Inc., EBITDA calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
The company's financial performance between 2012 and 2014 was characterized by significant volatility, marked by a period of substantial growth followed by a sharp contraction across all key earnings metrics.
- EBITDA Trend Analysis
- Earnings before interest, tax, depreciation and amortization (EBITDA) experienced a sharp increase from 3,139 million US$ in 2012 to 4,984 million US$ in 2013. This growth was followed by a significant decline in 2014, where EBITDA fell to 2,275 million US$. The 2014 value represents a decrease of approximately 54.3% from the 2013 peak and falls below the initial 2012 levels.
- Comparative Earnings Performance
- Net earnings and Earnings before tax (EBT) mirrored the trajectory of EBITDA. Net earnings peaked at 2,715 million US$ in 2013 before dropping to 1,043 million US$ in 2014. Similarly, EBT rose from 2,453 million US$ in 2012 to 4,090 million US$ in 2013, subsequently declining to 1,406 million US$ in 2014.
- Operational Insight and Non-Cash Expenses
- The variance between EBIT and EBITDA remained relatively stable over the three-year period, ranging between 385 million and 428 million US$. This indicates that depreciation and amortization expenses were consistent and did not contribute to the high volatility observed in the overall earnings figures. The fluctuations in profitability were primarily driven by changes in operating income and net financial results rather than changes in non-cash asset write-downs.
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Enterprise Value to EBITDA Ratio, Current
Kraft Foods Group Inc., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 59,575) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 2,275) |
| Valuation Ratio | |
| EV/EBITDA | 26.19 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| lululemon athletica inc. | 3.15 |
| Nike Inc. | 10.43 |
Based on: 10-K (reporting date: 2014-12-27).
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
Kraft Foods Group Inc., historical EV/EBITDA calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Enterprise value (EV)1 | 46,470) | 41,145) | 39,370) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 2,275) | 4,984) | 3,139) | |
| Valuation Ratio | ||||
| EV/EBITDA3 | 20.43 | 8.26 | 12.54 | |
| Benchmarks | ||||
| EV/EBITDA, Competitors4 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
3 2014 Calculation
EV/EBITDA = EV ÷ EBITDA
= 46,470 ÷ 2,275 = 20.43
4 Click competitor name to see calculations.
The valuation profile of Kraft Foods Group Inc. between 2012 and 2014 is characterized by a steady increase in enterprise value contrasted with significant volatility in operational earnings, resulting in a highly fluctuating EV/EBITDA ratio.
- Enterprise Value Trend
- A consistent upward trajectory in enterprise value is observed, rising from 39,370 million US dollars in 2012 to 46,470 million US dollars by 2014. This represents a steady expansion of the total market valuation over the three-year period.
- EBITDA Performance
- Earnings before interest, tax, depreciation, and amortization exhibited substantial instability. After an initial increase from 3,139 million US dollars in 2012 to a peak of 4,984 million US dollars in 2013, EBITDA declined sharply to 2,275 million US dollars in 2014, marking a significant reduction in operational cash flow generation.
- EV/EBITDA Ratio Analysis
- The EV/EBITDA ratio mirrored the volatility of the underlying earnings. The ratio compressed from 12.54 in 2012 to 8.26 in 2013, driven by the surge in EBITDA. However, in 2014, the combination of a higher enterprise value and a steep decline in EBITDA led to a sharp expansion of the ratio to 20.43, indicating a significantly higher valuation multiple relative to operational earnings.
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