Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Emerson Electric Co., EBITDA calculation
US$ in millions
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
The financial performance from 2014 to 2019 is characterized by an initial peak in operational profitability followed by a significant contraction and a subsequent period of steady recovery. EBITDA serves as the primary indicator of operational cash flow potential, exhibiting notable volatility during the mid-period before stabilizing in an upward trajectory.
- EBITDA Performance and Trend Analysis
- EBITDA reached a peak of US$ 5,176 million in 2015, representing the highest operational performance within the analyzed timeframe. A sharp decline occurred in 2016, with EBITDA falling to US$ 3,099 million. Following this trough, a consistent growth pattern emerged from 2017 through 2019, with the value increasing annually to reach US$ 3,882 million by September 30, 2019.
- Correlation Between Operational and Net Earnings
- A strong positive correlation is observed between EBITDA, EBIT, and Net earnings common stockholders. The simultaneous decline across all three metrics in 2016 suggests that the contraction was driven by operational headwinds rather than isolated financing or tax-related events. The subsequent recovery in Net earnings, which rose to US$ 2,306 million in 2019, mirrors the recovery trend established in the EBITDA figures.
- Analysis of Non-Cash Expenses
- The variance between EBITDA and EBIT indicates the impact of depreciation and amortization. These non-cash charges fluctuated in alignment with the broader earnings trend, decreasing during the 2016 contraction and increasing as the company returned to a growth phase between 2017 and 2019, where the gap between EBITDA and EBIT widened to US$ 822 million.
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Enterprise Value to EBITDA Ratio, Current
Emerson Electric Co., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 36,423) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 3,882) |
| Valuation Ratio | |
| EV/EBITDA | 9.38 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Boeing Co. | 21.83 |
| Caterpillar Inc. | 22.17 |
| Eaton Corp. plc | 24.73 |
| GE Aerospace | 26.54 |
| Honeywell International Inc. | 11.22 |
| Lockheed Martin Corp. | 18.87 |
| RTX Corp. | 20.20 |
Based on: 10-K (reporting date: 2019-09-30).
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
Emerson Electric Co., historical EV/EBITDA calculation, comparison to benchmarks
| Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Enterprise value (EV)1 | 48,778) | 46,577) | 40,322) | 38,847) | 36,569) | 47,420) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 3,882) | 3,627) | 3,172) | 3,099) | 5,176) | 4,397) | |
| Valuation Ratio | |||||||
| EV/EBITDA3 | 12.57 | 12.84 | 12.71 | 12.54 | 7.07 | 10.78 | |
| Benchmarks | |||||||
| EV/EBITDA, Competitors4 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
3 2019 Calculation
EV/EBITDA = EV ÷ EBITDA
= 48,778 ÷ 3,882 = 12.57
4 Click competitor name to see calculations.
The Enterprise Value to EBITDA (EV/EBITDA) ratio exhibited significant fluctuation in the early part of the observed period, followed by a phase of stabilization from 2016 through 2019. The valuation metric reached a minimum in 2015 before shifting to a higher, more consistent plateau.
- Enterprise Value Evolution
- Enterprise Value decreased by approximately 23% between 2014 and 2015, falling from 47,420 million to 36,569 million. Subsequently, a consistent upward trajectory was observed, with the value increasing annually to reach 48,778 million by September 30, 2019.
- EBITDA Performance
- Earnings before interest, tax, depreciation, and amortization peaked in 2015 at 5,176 million. However, a substantial decline occurred in 2016, where EBITDA fell to 3,099 million. A gradual recovery followed, with EBITDA rising to 3,882 million by the end of the period, although it remained below the 2014 and 2015 levels.
- EV/EBITDA Ratio Dynamics
- The ratio experienced a sharp contraction to 7.07 in 2015, resulting from the simultaneous decrease in Enterprise Value and a peak in EBITDA. From 2016 onward, the ratio rose sharply to 12.54 and remained relatively stable, peaking at 12.84 in 2018 before slightly moderating to 12.57 in 2019. This shift suggests a higher valuation multiple applied to the company's operational earnings in the latter four years compared to the initial two.
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