[TheJuice blogs about his financial models and projections for telecom companies, most frequently about Level 3 Communications. Do you want a turn at the microphone? Contact the webmaster]
Hello all. I thought due to the recent LVLT debt activity it would be a good time to update my valuation metric. As you can see the debt has moved up BIG TIME, from .70 cents on the dollar to .90! Wow.
Congrats to those that bought low and didn't sell. With the new numbers out I have a question, for those that read the blog - Dan Caruso, Dave Rusin and Rob Powell if you comment I would be quite excited.
"Should I use the face or market value of the debt in my IV calculations?"
I like to do ev/ebitdas calculations using the following formula:
(((Debt minus Cash)+Equity Value)/Annual Current Year EBITDAS estimate)
Of course this raises the question for the debt portion of the equation, which is should you use face or market value. I look at both but tend to focus more on face value, as does our analyst friend at Morgan Stanley. Any thoughts?
Post Script: Mr. Caruso, if you read this I wanted to again thank you for the awesome blog series on your valuation metric. I am going to use your formula and I'm debating about using your metric of "annualizing ebitdas 3 quarters from now" instead of my annual current year EBITDAS estimate.