EV/GCI (Enterprise Value to Gross Cash Income)
EV/GCI (Enterprise Value to Gross Cash Income) is a financial ratio that compares a company’s enterprise value (EV) to its gross cash income, which includes earnings before interest, taxes, depreciation, amortization, and other non-cash items. This metric helps investors assess a company’s valuation by evaluating its cash-generating ability relative to its overall value. EV/GCI is particularly useful for comparing companies in capital-intensive industries, as it provides a more comprehensive view of their ability to generate cash compared to traditional metrics.
Example
A company with an EV of $200 million and a gross cash income of $50 million has an EV/GCI ratio of 4, suggesting its valuation in relation to cash flow.
Key points
• Compares a company’s enterprise value to its gross cash income.
• Provides insight into a company’s valuation relative to its cash-generating ability.
• Useful for assessing companies in capital-intensive industries.
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