Enterprise Value Calculator (EV)
Enterprise value (EV) is part of the basic foundation of stock analysis for value investors. Enterprise Value Calculator can be thought of as the effective cost of buying a company or the theoretical price of a target company.
Enterprise Value (EV) measures the value of the assets that produce the company’s product or service.
What Does Enterprise Value Tell You?
If a business were to be acquired, enterprise value (EV) could be thought of as the potential takeover price. In many respects, EV varies from mere market capitalization, and many people believe it is a more accurate measure of a company’s worth. Since it incorporates debt in the value estimation, enterprise value is a much more reliable acquisition valuation.
Formula and Calculation for EV
There are multiple components to the method for calculating enterprise value. It, unlike market capitalization, considers sources of value other than securities.
EV = Market Capitalization + Market Value of Debt – Cash and Equivalents