EV/EBITDA adjustment
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Silver Iguana
Please correct the Enterprise to EBITDA calculation for companies that extensively use operating leases like most retailers.
Right now, you are grossing up the EV for operating leases but not grossing up the EBITDA to add back operating lease expense (your data provider if it is Refinitiv is adding back capital lease expense but not operating lease expense see pdf).
Be aware that companies other than some large casinos don't provide or guide to EBITDAR (Rent) on a regular basis.
EV to EBITDA was a valuation metric designed to remove financing decisions between companies and industries, however, right now your data results in excessively high valuations (overstates EV while understating cash flow) for operating lease heavy companies making absolute valuations misleading and comparisons between companies impossible.
S
Silver Iguana
Follow-Up on BBY Lease Treatment
I reviewed the Snapshot page for Best Buy (BBY) and calculated the embedded EBITDA implied by your EV/EBITDA multiple. Using the reported enterprise value of $18.29B (market cap + operating leases + debt – cash) and the NTM EV/EBITDA of 6.9x, the implied NTM EBITDA is approximately $2.65B. This aligns closely with Koyfin’s Actuals and Consensus figure of $2.66B.
For an external check, I referenced Bank of America’s model for BBY’s fiscal year ending January 2027, which is broadly comparable to NTM. Their EBITDA estimate of $2.67B flows through to a consensus EPS of $6.65. Importantly, none of these sources adjust EBITDA to add back operating lease expense associated with the $2.93B in lease liabilities ($2.309B long-term + $619M current). By my calculation, EBITDA should have been increased by at least $205M (2.93B × 7% carrying cost) to reflect the rental/finance impact.
Maybe as a way to resolve this, just use BBY and tell me what Capital thinks NTM consensus EBITDA is, what the adjustment is, and where the metrics are used. Right now I assume the EBITDA's I am seeing embedded in the Snapshot and Analyst Estimate pages are consensus/management since they seem to match up with outside/consensus sources which do not adjust for operating leases. You keep saying Capital embeds it in the multiple...what multiple/where? Are you saying that the EBITDA on the Analyst Estimate page doesn't tie to the Snapshot EBITDA?
Conor MacNeil
Silver Iguana: Data in the Actuals and Consensus tab as 'As Reported' values while the reminder of the platform is standardized data. They are not expected to match, no.
For instance, standardised free cash flow for a payments facilitator might be operating cash flow less CapEx. The as reported from the company might use EBITDA less Capex with other adjustments.
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Silver Iguana
I use your Snapshot page for a quick overview of the EV/EBITDA ratio. I see that in almost all instances operating leases are added into the Debt line item which is rolled into the EV. However, when I back into the EBITDA used to arrive at the EV/EBITDA ratio, the EBITDA nearly always approximates what companies are guiding to and also what leads down to recurring EPS.
Unfortunately, I can't think of any retailers that guide to EBITDAR or "rent" adjusted EPS. And their footnotes confirm they don't exclude rent from "recurring" metrics. So your Snapshot page is using EV grossed up for operating leases but EBITDA which is just management guidance/consensus. You can review any footnotes to any retailer guidance and see almost none exclude operating lease.
So if your EBITDA generally matches what management is guiding to and management doesn't guide to operating lease adjusted earnings then Capital IQ is not consistently adjusting the figures or they are showing up somewhere else on your website.
So even though Capital IQ tells you they are adjusting the EBITDA, I don't see it showing up on the in Snapshot page. Is it somewhere else on your site. Since I really like you site and want it to be the best it can be...I would happily call you and talk through a few real world examples.
Just run through BBY, PVH, MCW, GIII or almost any operating lease heavy, match up numbers to Snapshot and let me know what I am missing...or where I can find the adjusted data on your website...but before you do PLEASE first research and validate the data via company docs instead of just relying on what your data provider claims.
Conor MacNeil
Silver Iguana: Hey David, appreciate your thoughts here.
We confirmed with CapIQ and they treat operating leases consistently in both the numerator and denominator for TEV/EBITDA:
TEV uses Total Debt that includes Current Portion of Leases and Long Term Leases (so lease liabilities are included in TEV).
EBITDA used for the multiple is lease-adjusted via “Lease Adjustment for EBITDA” (so the denominator is grossed up as well).
They also provide EBITDAR separately, but the multiple itself is already using the lease-adjusted EBITDA variant above.
So the intent is exactly what you’re describing: lease liabilities are in TEV and lease costs are added back in EBITDA, using post-IFRS accounting, to avoid overstating EV/EBITDA for lease-heavy businesses.
That said, your broader UX point is fair: if a user expects “plain” management/consensus EBITDA, the lease-adjusted version can be non-obvious on a snapshot view. We consider making the lease treatment / definition more explicit in the UI so it’s clear at a glance.
Conor MacNeil
Hey David — thanks for the detailed note.
We don’t use Refinitiv; our EV/EBITDA is sourced from S&P Capital IQ. For lease-heavy companies, Capital IQ already provides lease-adjusted EBITDA (effectively EBITDAR) alongside TEV including operating lease liabilities, so the numerator and denominator are treated consistently.
Where available, we rely on Capital IQ’s standardized EBITDA (Lease Adjusted) rather than attempting to back-solve rent ourselves, precisely because most companies don’t disclose operating lease expense cleanly or consistently. This avoids introducing modelled assumptions that would further reduce comparability.
That said, we agree with the broader point: EV/EBITDA can be misleading for operating-lease-heavy sectors if users are unaware of the underlying adjustments. We can look at making the lease treatment and metric definitions more explicit in the UI so the methodology is clearer at a glance.