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Enterprise Value to EBITDA (EV/EBITDA)

Difficulty: Intermediate


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

General Electric Co., EBITDA calculation

USD $ in millions

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12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net earnings (loss) attributable to the Company (5,786) 8,831  (6,126) 15,233  13,057 
Add: Net income attributable to noncontrolling interest (270) (291) 331  112  298 
Less: Loss from discontinued operations, net of taxes (308) (954) (7,495) (112) (2,120)
Add: Income tax expense (3,043) (464) 6,486  1,772  676 
Earnings before tax (EBT) (8,791) 9,030  8,186  17,229  16,151 
Add: Interest and other financial charges 4,869  5,025  3,463  9,482  10,116 
Earnings before interest and tax (EBIT) (3,922) 14,055  11,649  26,711  26,267 
Add: Depreciation and amortization of property, plant and equipment 5,139  4,997  4,847  9,283  9,762 
Earnings before interest, tax, depreciation and amortization (EBITDA) 1,217  19,052  16,496  35,994  36,029 

Based on: 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-27).

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. General Electric Co.'s EBITDA increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Enterprise Value to EBITDA Ratio, Current

General Electric Co., current EV/EBITDA calculation, comparison to benchmarks

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Selected Financial Data (USD $ in millions)
Enterprise value (EV) 140,084 
Earnings before interest, tax, depreciation and amortization (EBITDA) 1,217 
Ratio
EV/EBITDA 115.11
Benchmarks
EV/EBITDA, Competitors
3M Co. 13.98
Danaher Corp. 18.95
Honeywell International Inc. 14.06
EV/EBITDA, Sector
General Industrials 20.22
EV/EBITDA, Industry
Industrials 14.66

Based on: 10-K (filing date: 2018-02-23).

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

General Electric Co., historical EV/EBITDA calculation, comparison to benchmarks

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Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 196,136  308,838  372,010  497,126  512,566 
Earnings before interest, tax, depreciation and amortization (EBITDA)2 1,217  19,052  16,496  35,994  36,029 
Ratio
EV/EBITDA3 161.16 16.21 22.55 13.81 14.23
Benchmarks
EV/EBITDA, Competitors
3M Co. 15.16 13.21 11.91 12.79 11.07
Danaher Corp. 17.93 17.88 15.88 13.67 11.64
Honeywell International Inc. 14.21 12.71 11.10 11.83 11.40
EV/EBITDA, Sector
General Industrials 22.96 15.02 16.94 13.40 13.21
EV/EBITDA, Industry
Industrials 15.26 13.29 11.89 11.61 11.16

Based on: 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-27).

2017 Calculations

3 EV/EBITDA = EV ÷ EBITDA
= 196,136 ÷ 1,217 = 161.16

Ratio Description The company
EV/EBITDA EV/EBITDA is a valuation indicator for the overall company rather than common stock. General Electric Co.'s EV/EBITDA ratio declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.