Why does Buffet urge investors to use EBIT and not Net Income as metric for valuating companies?

Sharing is Caring!

by mrcet007

Warren Buffett’s annual letter to Berkshire Hathaway shareholders

fm.cnbc.com/applications/cnbc.com/resources/files/2020/02/22/2019ltr.pdf

Charlie and I urge you to focus on operating earnings – which were little changed in 2019 – and to ignoreboth quarterly and annual gains or losses from investments, whether these are realized or unrealized.

My assumption

  • operating earnings = EBIT
  • quarterly gains/losses = Net income/profit

Why is EBIT a better metric than Net Income for valuating companies?

 

 

141 views

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.