I've been looking at a business recently that I'm excited about. Its EBITDA is right in my target range, the business has some scale, it has a diverse employee base, room (and I think a plan) to grow, etc. But the business requires an ongoing investment in CAPEX that obviously falls below the line on the P&L (i.e., depreciation). To give you some context, the EBITDA margin is around 12% but CAPEX is another 6% of revenue. I know almost everyone looks at EBITDA, but do you think it makes more sense to look EBITA (i.e., don't exclude the "D") since the CAPEX is an ongoing requirement? Or do you think about it some other way?
One other related question: will an SBA lender allow you to borrow more in the future to fund CAPEX? If they'll let you, the business can support itself for a few years (since you'd get to finance the CAPEX and not have to pay for it all at once). But if you won't be able to finance it, it will be much more difficult to make it work without lower the multiple or putting more money down.
Do you still value a company on EBITDA if it has high CAPEX?
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