Scrutinize the KPIs a company chooses not to highlight. For instance, Lumine and Topicus eschew standard metrics like EBITDA and ARR, instead framing their performance around a custom "Free Cash Flow Available to Shareholders" metric. This reveals their deep focus on cash generation for M&A, not chasing growth narratives.

To counter analysts' negative view of TCI's high capital costs and low GAAP profits, Malone created EBITDA. This metric highlighted the company's strong underlying cash flow by adding back non-cash depreciation, successfully changing the narrative around the business model.

Despite its decline in popularity, Tim Guinness uses balance sheet gearing (debt to net tangible assets) as a critical risk tool. His experience through multiple banking crises taught him that when total debt and creditors exceed twice the net tangible assets, a company requires careful scrutiny.

SpaceX altered its CFO's compensation metric from free cash flow to adjusted EBITDA. This is a critical signal that the company is prioritizing and incentivizing massive capital expenditure and debt-fueled growth for its AI and Starlink businesses, rather than focusing on immediate cash generation.

WeWork created "Community Adjusted EBITDA," a metric that conveniently excluded core costs like rent and salaries. This farcical KPI incentivized top-line growth at any cost, masking massive unprofitability and ultimately destroying shareholder value. Be wary of overly creative accounting.

The use of "adjusted EBITDA," which includes unrealized synergies and cost savings, has doubled over a decade. This practice makes leverage appear lower than it is on a reported basis, concealing significant risk. An S&P study confirmed these adjustments are rarely realized, particularly in the single-B space.

A profitable P&L can mask imminent death. A big contract booked as revenue makes you feel rich on paper, while you're actually one payroll cycle from insolvency. The only true survival metric is a rolling 13-week cash flow document, updated weekly, showing actual cash in and cash out.

The era of easy money is over, forcing a reckoning on EBITDA adjustments. Lenders are more skeptical of prospective add-backs, while sponsors must now generate real operational improvements to achieve target returns. The tailwinds of cheap financing and multiple expansion that previously masked underperformance have disappeared.

"Adjusted EBITDA" presents a curated version of reality, much like sponsored posts. It adds back costs like stock-based compensation and projects unproven synergies, creating a flattering but often misleading picture of a company's health. S&P data shows these adjustments rarely pan out.