Thank you for the D&A explanation. I felt really stupid for asking the question after reading your answer. Obviously both groups within the company, the folks in COS and the folks in GS&A, contribute separately and partially to the combined D&A expense line item.
What's bothering me is that D&A is such a large fraction of EBITDA.
I'm attempting to guesstimate Free Cash Flow to the Firm, ignoring changes in working capital and using a more normal Effective Tax Rate, ETR, as follows:
That implies that there is roughly 65 cents of FCFF within a dollar of EBITDA. That's outside my comfort range. If you were to capitalize that at 5% that would imply an EV/EBITDA ratio of 13 (0.65/ 0.05) which might make sense for AAPL, GOOG, and KO, but is not credible for a small brewer, in my opinion. A more realistic EV/EBITDA of 8 implies a FCFF/EBITDA of 40%. That's what I was expecting to find.
Perhaps the correct answer is that EBITDA is too low relative to D&A instead of my original assumption that D&A is too high relative to EBITDA.
I'm not comfortable with the current CapEx to Depreciation ratio ( 2.303 / 6.378 = 0.36 ) either. I would expect the ratio to fall within the range 1.00 to 1.50 eventually, when HOOK becomes a mature, stable company.
In summary, the current numbers are just not working for me and I would hesitate to value the company based on them.
I agree with you. I've never owned SAM, but I have owned HOOK. My problems with HOOK involve both valuation and liquidity. I've had the same problem that "pivo123" mentioned yesterday. It took days to execute a trade (to buy and then later, to sell) of several hundred shares using an "all or nothing" limit order. And I did use realistic limits (something that had actually happen more than once in the previous five days) both times.