To move from Equity Value to Enterprise Value, you subtract non-core-business Assets – just Cash in this case – and you add items that represent other investor groups – Debt and Preferred Stock in this case. Enterprise Value = Equity Value + Debt + Preferred Stock + Noncontrolling Interests – Cash.Equity Value = Share Price * Shares Outstanding.
The calculations for both Equity Value and Enterprise Value are shown above: Here’s a simple example, along with the basic calculations:
CONVERT ENTERPRISE POINTS TO DELTA FREE
You use both these concepts in company valuations, and you often move between them in analyses.įor example, Unlevered Free Cash Flow in a DCF pairs with Enterprise Value, and you calculate the company’s implied Enterprise Value first and then back into its implied Equity Value and implied share price from that.Īnd in comparable company analysis, you use metrics and multiples that are based on Enterprise Value, such as EV / EBITDA.Įnterprise Value is important because it is not affected by a company’s capital structure – only by its core-business operations.
CONVERT ENTERPRISE POINTS TO DELTA HOW TO
This tutorial will explain how to calculate Enterprise Value – but let’s start with the basics and explain what Enterprise Value is before getting into the numbers: What is Enterprise Value?Įnterprise Value is the value of only the company’s core-business Assets, but to ALL INVESTORS (Equity, Debt, Preferred, and possibly others) in the company.īy contrast, Equity Value (also known as the Market Capitalization or “Market Cap”) is the value of ALL the company’s Assets, but only to EQUITY INVESTORS (common shareholders).
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