powerful and versatile way of controlling for differences
acrosscompanies.Notonlycantherebeasmanyindependent
variables as the data will sustain, but we can allow for
nonlinear relationships between multiples and the
fundamentals.Thecaveat,aswithequitymultiples,isthatour
objective is not to explain away all differences across
companies butratherto explain onlythose differences that
make sense fundamentally.
ILLUSTRATION 9.3: Comparing EV/Operating Income
Multiples
Enterprise value-to-EBITDA multiples are widely used to
assesscompaniesinmanufacturingandheavyinfrastructure
businesses. The following table summarizes the enterprise
valuetoEBITDAmultiplesforsteelcompaniesintheUnited
States in March 2001.