Enterprise Value (EV)
Returns the enterprise value for a company, which represents the theoretical total cost to acquire the entire business.
Enterprise Value = Market Cap + Total Debt - Cash and Cash Equivalents
EV vs Market Cap
| Metric | Formula | Represents |
|---|---|---|
| Market Cap | Price x Shares | Equity value only |
| Enterprise Value | Market Cap + Debt - Cash | Total business value |
Why Use EV?
- Acquisitions: EV represents what you'd actually pay to buy a company
- Comparison: Better for comparing companies with different capital structures
- Valuation Ratios: EV/EBITDA is more meaningful than P/E for some analyses
Common EV Ratios
| Ratio | Formula | Use |
|---|---|---|
| EV/EBITDA | EV / EBITDA | Primary valuation metric |
| EV/Sales | EV / Revenue | High-growth companies |
| EV/EBIT | EV / Operating Income | More conservative |
Examples
=EnterpriseValue("AAPL")=EnterpriseValue("MSFT")=EnterpriseValue("GOOG")=EnterpriseValue(A1)=EnterpriseValue("AAPL")/1000000000When to Use
- M&A analysis and valuation
- Comparing companies with different debt levels
- EV-based valuation ratios
- Leveraged buyout analysis
- Capital structure neutral comparison
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Quick size comparison | MarketCapitalization() |
| Need EV/EBITDA ratio | EV_to_EBITDA() |
| Historical enterprise value | hf_EnterpriseValue() |
| Financial institutions | Use market cap (EV less meaningful) |
Common Issues & FAQ
Q: Why is EV different from market cap? A: EV adds debt (you assume it when buying) and subtracts cash (you get it when buying). A company with high debt has EV > Market Cap. A company with lots of cash has EV < Market Cap.
Q: Why might EV be negative? A: If a company has more cash than its market cap + debt, EV can be negative. This is rare but can happen with cash-rich small caps.
Q: How do I calculate EV/EBITDA?
A: =EnterpriseValue("SYMBOL") / EBITDA("SYMBOL")
Q: Why not use EV for banks? A: Banks' debt is part of their operations (deposits). Using EV would double-count their liabilities. Use market cap for financial institutions.
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