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  "documentTitle": "valuation multiples primer",
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  "notes": "Page 33 from a UBS Warburg primer on valuation multiples.",
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      "text": "Multiples using OpFCF easier to interpret than those using free cash flow",
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      "text": "OpFCF is a suitable basis for valuation than either EBITDA or EBIT",
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      "text": "FCF is the cash available to all providers of finance",
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      "text": "EV/OpFCF is preferable to EV/EBITDA for comparing companies within a sector, or for comparing companies across sectors or markets where companies have widely varying degrees of capital intensity.",
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      "text": "OpFCF is more comparable than EBITDA and less susceptible to accounting distortions than EBIT, and is therefore a more suitable basis for valuation multiples. OpFCF does, however, add another layer of subjectivity via the calculation of maintenance capital spending and net working capital inflation.",
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      "text": "This multiple cannot be used when current cash flow is negative. Use normalised OpFCF or a forward-priced multiple instead.",
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      "text": "To pay interest or repay debt\nTo build cash balances or other investments\nTo pay dividends or buy back shares",
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      "text": "EV/OpFCF is a price to cash flow measure similar to EV/EBIT. OpFCF is not a true cash flow, however, as it does not include actual capital expenditure or change in working capital; it is a normalised EBIT or a smoothed cash flow.",
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      "text": "Operating free cash flow is a smoothed measure of free cash flow to the firm, for which historical figures can be highly volatile. Because of this, multiples using OpFCF can be easier to interpret than those using free cash flow.",
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      "text": "Formula: EV/FCF = 1/(WACC - g)",
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      "text": "Definition: Core EV/normalised after-tax core enterprise free cash flow (or FCF, also known as free cash flow to the firm). ROIC is calculated using after-tax FCF in the numerator.",
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      "text": "Enterprise free cash flow is the cash available to the providers of finance. FCF = debt cash flow + equity cash flow. It may be used:",
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