The enterprise value (EV) estimates the value of the whole company. Unlike the market capitalization, it also takes debt, minority interests, preferred stock and cash into account.
EnterpriseValue < MarketCapitalization
What is the difference between enterprise value and market capitalization?
Market capitalization is the market value of the equity. Enterprise value adds debt, minority interests and preferred stock and subtracts cash and equivalents. It therefore takes further claims on the company and the cash it holds into account.
EV = market capitalization + debt including leases + minority interests + preferred stock − cash and equivalents
If cash and equivalents exceed debt, minority interests and preferred stock combined, EV is lower than market capitalization. The data section explains which values Critivest uses.
Calculating enterprise value: an example
For the fictional Example Company:
| Market capitalization | EUR 30 billion |
|---|---|
| Debt including leases | + EUR 8 billion |
| Minority interests | + EUR 1 billion |
| Preferred stock | + EUR 0 |
| Cash and equivalents | − EUR 4 billion |
| Enterprise value | EUR 35 billion |
Why can enterprise values differ?
- Market capitalization and balance sheet have different dates: the market value is current, the balance sheet is from the end of the latest quarter.
- Book values for minority interests and preferred stock make the enterprise value an approximation.
- Critivest does not subtract short-term investments, only cash and equivalents. Other sources that subtract them arrive at a lower value.
- For banks and insurers, the enterprise value says little, as debt is part of their business.
- The enterprise value can be zero or negative if cash and equivalents exceed everything else.
Using enterprise value as your own criterion
This condition is met if the enterprise value is below the market capitalization:
EnterpriseValue < MarketCapitalizationRelative to EBITDA, it gives the valuation ratio EV/EBITDA. This condition is met if the enterprise value is less than ten times EBITDA; with an EBITDA of zero or below, it cannot be evaluated:
EnterpriseValue / CurrentPeriodEBITDA < 10You set the limits yourself; they are examples, not recommendations.
Which balance sheet values does Critivest use?
The market capitalization is the latest stored market value. All other values come from exactly one balance sheet, the latest, without filling gaps from older quarters. Critivest takes minority interests and preferred stock at book value, not at market value. If any of the values is missing, the enterprise value is not available; a value explicitly reported as zero counts, though. If a company reports preferred securities as liabilities, it remains unclear whether its debt already includes them. Critivest then does not calculate the enterprise value rather than count them twice or not at all.
Related metric: net cash
Net cash (NetCash) is the balance of cash and equivalents, short-term investments and debt. If debt
outweighs the others, it is negative. With the figures of Example Company and short-term investments of EUR 1
billion, net cash comes to EUR −3 billion (4 + 1 − 8), which means net debt of EUR 3 billion.
Periods and missing values: Methodology.
Formula reference in Critivest
Name in conditions: EnterpriseValue
EnterpriseValue = MarketCapitalization + CurrentTotalDebt + CurrentMinorityInterest + CurrentPreferredStock - CurrentCashAndEquivalentsEstimated value of the whole business in the stock currency: market capitalization plus debt including leases, minority interests and preferred equity, less cash and equivalents. Uses the latest balance sheet, with minority interests and preferred equity at book value
Name in conditions: NetCash
NetCash = CurrentCashAndEquivalents + CurrentShortTermInvestments - CurrentTotalDebtCash and equivalents plus short-term investments minus total debt including leases, as reported or else current plus long-term debt, all from the latest single balance sheet, in the stock currency. Excludes long-term investments; missing components remain unknown. A negative value means net debt
Names used in conditions
MarketCapitalization- Market capitalization
CurrentTotalDebt- Debt including leases from the latest balance sheet
CurrentMinorityInterest- Minority interests from the latest balance sheet
CurrentPreferredStock- Preferred equity at book value from the latest balance sheet
CurrentCashAndEquivalents- Cash and equivalents from the latest balance sheet
CurrentShortTermInvestments- Short-term investments from the latest balance sheet
Related formulas
- P/E ratio (price-to-earnings ratio): The P/E ratio divides a company's market value by its earnings. Critivest calculates it from the market capitalization and the earnings of the last four quarters.
- Debt-to-equity ratio: The debt-to-equity ratio relates a company's liabilities to its equity. How Critivest calculates it from the latest balance sheet.
Sources
- Enterprise value, Wikipedia
Last updated: November 4, 2026