Glamsplainin' EBITA

COMMENTARY FOR WEEK OF July 26, 2018


No, this is not the country bordering Wakanda.

EBITA stands for Earnings Before Interest Taxes Depreciation and Amortization. It’s basically a measure of a company’s profit. It separates the company’s expenses from how much money it made in order to get a good idea of how the company is performing.

EBITA haters say that it’s like a wave of a fairy godmother’s magic wand, it can make the least profitable companies look like they are the prettiest girls in the club wearing red bottoms and rollin’ in dough. But when interest payments and taxes are factored in, ish gets real. This is like getting paid from work and telling everyone you have 1,2,3,4,5,6,7,8 M’s in my bank account and you haven’t even paid your bills yet. Even 21 Savage would tell you it’s not what you make but what you keep that matters.

EBITA does have some followers though. They say it is a useful tool in comparing companies to one another and to the overall industry. EBITA has been useful in comparing tech companies who have to spend crazy loot on frequent upgrades. EBITA gives investors an indication of how much money they made before they had to spend that money. It is also helpful in checking out start-up companies who have borrowed money and are technically not profitable yet.

Though EBITA is useful, it should never be the only thing you consider when buying a stock. Make sure to do a full background check before purchasing.

Have a great weekend Savvies!

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