Enterprise Value

Definition

Click "Learn More" below to see how YCharts calculates Enterprise Value.

Enterprise Value (EV) is a valuation metric alternative to traditional market capitalization that reflects the market value of an entire business. Like market cap, EV is a measure of what the market believes a company is worth. Enterprise value captures the cost of an entire business, including debt and equity. It is a sum of claims of all preferred shareholders, debt holders, security holders, common equity holders, and minority shareholders - unlike market cap, which only captures the total value of common equity securities.

EV is considered the theoretical purchase ("takeover") price of a business because a purchaser would take on the company's debt, while pocketing the company's cash and gaining a right to all of the company's future earnings.

Formula

Enterprise Value = Market Capitalization + Current Portion of Long Term Debt + Notes Payable + Long Term Debt + Book Value of Preferred Stock + Book Value of Minority Interest - Cash and Cash Equivalents

Note: Some providers will subtract the value of Marketable Securities and certain Long Term Investments from the Enterprise Value of a company. This is a reasonable approach, but because of how our data provider aggregates data, we cannot separate marketable securities (or long term cash-like investments) from other investments, which may not be as liquid. Hence, we conservatively reduce Enterprise Value only by the value of Cash and Equivalents, and do not subtract marketable securities.

Related Terms

Acquisition, EV / EBIT, EV / EBITDA, EV / Free Cash Flow, EV / Revenues, Intrinsic Value, Liabilities to Market Cap and Net Liabilities, Market Capitalization, Valuation