Searching for value in universe screens...

ASX Small caps & Micro caps, enterprise value/EBITDA, determining if a stock is cheap or expensive.

To start off the year we thought we would publish an interesting screen from the universe of stocks that we look at for H&G’s High Conviction Fund. (That is ASX listed Small and Microcaps, 10-150 million in market cap).

One metric we use to gauge where a particular stock sits in the universe compared to its sector and peers is the enterprise multiple.

“Enterprise value/Earnings before interest, tax, depreciation & amortization (more commonly referred to by the acronym EV/EBITDA) is a popular valuation multiple used to determine the fair market value of a company.”¹

It is best viewed as a relative valuation metric, and/or a proxy for discounted cashflow.²

When displayed as a histogram with EV/EBITDA buckets against size (market capitalization) and each GICS Sector colour coded it is easy to quickly scan through the universe for potential opportunities for further research.

9 Jan 2022

*Data is sourced from Refinitiv/DataStream using latest available company filing and may not reflect any proforma M&A announcements or corporate actions. The above is merely an indicative screen from which to base further research and does not represent a recommendation for or against any companies shown.

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We hope you find this resource useful.

The chart for this article is an extract from our weekly brief sheet that provides a market round up, a selection of useful data points we use for our investment analysis, and some interesting articles/charts we have noticed recently.

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1. https://en.wikipedia.org/wiki/EV/Ebitda

2. https://www.morganstanley.com/im/publication/insights/articles/article_everythingisadcfmodel_us.pdf

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