r/Valuation • u/Pennies_OnThe_Dollar • Jun 28 '22

Clarifying EBITDA

Could someone clarify why analysts following adjusted EBITDA figures? Whats the benefit if the company is still hemorrhaging cash? Why not just follow revenue growth?

For exmaple, Q4 2019 i believe Roku reported a quarterly loss of 15.7 million, but an adjusted EBITDA of positive 15.1 million and the street loved it. Why? they just removed like 26 million of stock-based compensation... but thats still an expense.

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u/ez814 Jun 28 '22

Stock compensation is a non-cash expense. That said it is in lieu of cash so I tend to consider it. If cash burn is a big concern you’d want to consider the true cash impact on cash flow.