P/E Versus The EV/EBITDA

I have noticed, that with merger mania in full swing, Wall Street is turning to increasingly disjointed and exotic valuation metrics in order to justify the high valuations, (by value investing standards) that are now being placed on many stocks. None of these is more prevalent and suspect than the EV/EBITDA ratio.   Once described by Warren Buffett’s lieutenant, Charlie Munger as, “bulls**t” the now widespread use of the EBITDA figure leaves much to be desired. (The full Munger quote was: “Every time you see the word EBITDA, substitute it with the words ‘bulls*it earnings’!” — Referring to the potential for…