Hi,
I have a basic question. In his annual letters buffett said that, cash flow measure that is our owner earnings is of no use when it comes to businesses like manufacturing, real estate, construction, infra, utilities, etc. because their maintenance capex part is so huge and they can defer those maintenance capex…
So how one calculate the value of these companies? In some books they said EV/EBITDA is good measure…but again as Buffett said and it does make sake that, not considering main. capex is good way to get drowned.
One way what I thought to value utilities is, calculating how much they earn after all for every unit of energy they sold…and how much energy they can produce and sell in future. Given their current investments and projects in pipeline. Am I lil correct here?
Coj we cannot even calculate their returns on assets or invested capital, as these companies need heavy upfront capital.
So how can we value them? If possible please help Mr. Ishmohit, I am just not able to find answer to this topic, its been months.
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