EV
ValuationDefinition
Enterprise Value. The total value of a company viewed by an acquirer — equity market cap plus debt minus cash and equivalents. Represents what it would actually cost to buy the entire company outright.
EV is preferred over market cap for comparing companies with different capital structures. EV/EBITDA, EV/Sales, and EV/EBIT are all standard multiples in M&A and equity research.
EV is preferred over market cap for comparing companies with different capital structures. EV/EBITDA, EV/Sales, and EV/EBIT are all standard multiples in M&A and equity research.
Formula
EV = Market cap + Total debt − Cash & equivalents
Example
Company has $5B market cap, $1B debt, $200M cash. EV = $5B + $1B − $200M = $5.8B. If EBITDA is $500M, EV/EBITDA = 11.6x.