multiplescannotbe computedfor thesefirms, thereis less
potential for bias with EBITDA multiples than with P/E
ratios. This is especially true for companies in heavy
infrastructure sectors (telecom, cable and cellular firms),
wheredepreciationisalargeexpenseitem(causingearnings
to become negative).
Value/Book Capital
The value-to-book capital ratio can be computed in two
differentways,onewith cashtreatedaspartofcapitaland
one without:
InFigure 9.2,welook atthedistribution ofvalueto book
capitalandenterprisevaluetoinvestedcapital.Aswiththe
other multiples, it is a heavily skewed distribution. The
median value-to-book ratio is 1.83, and the median EV/
investedcapitalratiois2.06.Bothareslightlylowerthanthe
median price-to-book ratio computed for the same firms.
Whilethetwodistributionsaresimilarinmanyrespects,the
enterprisevalue-to-netbookcapitalratiostendtohavehigher
average and median values than value-to-book capital ratios.
FIGURE 9.2 Value/Book Capital and EV/Invested
Capital—U.S. Firms in January 2006