Looking at Schlumberger (SLB) annual report for 2015.
So...in millions
EBIT = $2,991
Depreciation & Amortization = $4,078
EBITDA = $2,991 + $4,078 = $7,069
Gross Profit = $7,308
So EBITDA is pretty much equal to gross profit which implies they had almost no operating expenses. If I go to 2014 and beyond into the past, the implied operating expense is actually NEGATIVE. Seeing as there is no way SLB had negative operating expeneses, depreciation and amortization is throwing a monkey wrench into the whole computation of free cash flow as I can't simply accept a $0 or negative sum of operating expenses.
I have a model which downloads gross profit, EBITDA, and EBIT from a data API feed. What do I do when this situation exists. As such, my model is valuing SLB as if it has 168% of upside, but of course, that assumes they don't have any operating expenses, which they clearly do, about $1.857 billion in FY2015.
So...in millions
EBIT = $2,991
Depreciation & Amortization = $4,078
EBITDA = $2,991 + $4,078 = $7,069
Gross Profit = $7,308
So EBITDA is pretty much equal to gross profit which implies they had almost no operating expenses. If I go to 2014 and beyond into the past, the implied operating expense is actually NEGATIVE. Seeing as there is no way SLB had negative operating expeneses, depreciation and amortization is throwing a monkey wrench into the whole computation of free cash flow as I can't simply accept a $0 or negative sum of operating expenses.
I have a model which downloads gross profit, EBITDA, and EBIT from a data API feed. What do I do when this situation exists. As such, my model is valuing SLB as if it has 168% of upside, but of course, that assumes they don't have any operating expenses, which they clearly do, about $1.857 billion in FY2015.