Enterprise Value (EV), Borsatalkhaleej.com

Glossary

Enterprise Value (EV)

The enterprise value (EV) measures the value of the overall ongoing operations of a company. It is the measure which calculates how much it would cost to buy a company’s business, free of its debts and liabilities. The enterprise value is a more accurate estimate of the takeover price of a company than the market capitalization.

Enterprise value is commonly used by investors in identifying lower value companies. A company with good earnings and possibly even a solid dividend may sound very appealing to investors and this company might have a large market capitalization too. However, if you look further and calculate the company's enterprise value, you may find serious debt obligations that pose a problem. If you compare the enterprise value of an equally well-earning company and find that it has a higher enterprise value, purchasing the latter’s stocks would be a better overall decision.

Calculated as: Market Cap + Total Debts (short and long term) + Minority Interest (from BS) + Preferred Shares (BS) - Cash & Cash Equivalent

Glossary

Enterprise Value (EV)

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