What Do EBITDA and Target Estimate Mean?

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EBITDA, target estimate: Could you define these terms? -- N.M.

OK, let's start with the first one, EBITDA, a commonly used term in stock financial analysis, which stands for earnings before interest, taxes, depreciation and amortization. Different readers will have a varying level of understanding when it comes to EBITDA, so forgive me if I stick with the basics, for the benefit of beginners.

As investors, the most important feature that we look for in a company is earnings, either immediately or some time in the (hopefully) near future. When we look at a company's financial success, we typically first look at its earnings statement, one of the most important financial statements for a company, along with its balance sheet and cash flow statement.

To keep things simple, an income statement starts with revenue at the top and then shows a list of expenses (and often a few additional income sources) so that an investor can see how the company arrives at its earnings for a particular period of time, be it a year or a quarter. ...