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"Ebitda misses a company's opportunity for expanded earnings growth from falling interest expense or decreasing tax rates," she said.
Home Depot (38, HD), whose cavernous stores sell home improvement and building supplies across North America, has expanded earnings at a 17% annual pace over the past five years.
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Shunning such firms, Khwarg looks for companies with sound strategies for expanding earnings.
Theyve managed this feat with one simple promise: rapidly expanding earnings, year after year.
But Argon is expanding earnings at a 56% annual clip, and its Ebitda/net ratio is 1.8.
Genesee & Wyoming, a short-line railroad that has interests in 49 railroads in five countries, has recently been expanding earnings at a 23% annual clip.
The $3 billion (sales) maker of hand tools and environmental controls has been expanding earnings per share at a 24% compound annual rate since 1994.
We limited the list to companies that pay out no more than 55% of net income as dividends and that are expected by analysts to expand earnings in both fiscal 2003 and fiscal 2004.
I continue to like Vornado Realty Trust (114, VNO), which keeps expanding earnings amid strong demand for office space, especially in Washington, D.C. and New York, where it is a big presence.
Eric Kirzner, the John H Watson Chair in Value Investing at Toronto's Rotman School of Management, recently looked at how much better value investing has done versus growth investing a strategy that usually involves buying high-growth companies with rapidly expanding earnings. .
They made a movie about what happened when you took those loans [Martin Scorsese's mob-filled Casino], so we expanded with earnings and bank loans".
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