Chapter 6 warns about using EBIT and EBITDA as profit measures and, correspondingly, warns about using the measure, Price/EBITDA as a P/E multiple. The reason is simple: In assessing value, one cannot leave anything out. Depreciation, amortization, and taxes are real costs that reduce value.
But there is another feature of accounting which reinforces the point: For valuation, the accounting must be clean surplus. That was introduced when first presenting the residual income valuation model in chapters 2 and 3: The accounting for a period must obey the principle,
Book Valuet = Book Valuet-1 + Comprehensive Earningst – Net Dividendst
If this is violated, the consequent valuation is incorrect. It’s really saying the same thing: Comprehensive Earnings are those with nothing left out. Leaving out a component of earnings is mis-valuation.