How to use the enterprise value and multiples calculator
- Enter the share price and the number of shares outstanding, in the same unit as your other amounts, for example millions.
- Enter total debt and cash, and open the advanced options for preferred stock and minority interest.
- Enter revenue, EBITDA and EBIT. Leave a metric empty to skip its multiple.
- Read market capitalization, enterprise value, net debt and the multiples.
Formula
market capitalization = share price x shares outstanding
enterprise value = market capitalization + debt + preferred stock + minority interest - cash
EV / metric = enterprise value / revenue, EBITDA or EBIT
net debt = debt - cash
Enterprise value is the price of the whole business to all who fund it, not just shareholders. That makes multiples comparable between companies with different amounts of debt.
A company worth 1,000 on the market
A share price of 50 and 20 shares give a market capitalization of 1,000. Adding debt of 300 and subtracting cash of 100 gives an enterprise value of 1,200, with net debt of 200. Revenue of 1,200 gives EV / revenue of 1.00x, EBITDA of 150 gives 8.00x, and EBIT of 110 gives 10.91x.
A company with a large cash pile can have a negative enterprise value: with cash of 2,400 in place of 100, the value is (1,100), and the multiples are shown as not meaningful, because dividing by a negative enterprise value says little.
Why enterprise value instead of market value
The price to earnings ratio looks only at the equity, so a company that borrows a lot can look cheap. Enterprise value adds the debt and takes out the cash, which gives a better like-for-like comparison. Compare it with the P/E Ratio Calculator, and with a value built from forecasts in the DCF Calculator.
For a private company, the Business Valuation Calculator applies an earnings multiple, and the WACC Calculator estimates the cost of the capital that the enterprise value represents.
Matching earnings to value
EBITDA and EBIT are earnings before the interest paid on the debt, so they pair naturally with enterprise value, which includes the debt. Net income pairs with equity value. Mixing them gives a mismatch that can mislead, so keep each metric with its matching value.
Assumptions and limits
- All amounts use one currency and one unit, such as millions, and shares are in the same unit.
- Debt, preferred stock and minority interest are at the values you enter, usually book values.
- Cash means cash and equivalents that are free to use.
- Leases, pensions and other debt-like items are included only if you add them to debt.
- This is arithmetic on your figures and not investment advice.
Frequently asked questions
Why subtract cash?
Cash the company holds could pay down debt or be returned, so it reduces what an acquirer would effectively pay for the operating business.
What is minority interest?
It is the part of a subsidiary that outsiders own. It is added because the company's earnings include all of the subsidiary.
Why can a multiple be not meaningful?
If enterprise value or the metric is zero or negative, the ratio does not describe a price per unit of earnings, so the tool says so instead of printing a number.
Which multiple should I use?
EV to EBITDA is common for comparing companies with different debt and depreciation. EV to revenue is used when earnings are small or negative.