Fundamental analysis
Enterprise value
Definition
The value of the whole business. Subtract net debt (debt minus cash) to get the value that belongs to shareholders.
Example
Say a DCF values company XYZ’s whole business at $1.2 billion. XYZ owes $400 million and holds $100 million of cash, so net debt is $300 million and the shareholders’ part is $900 million, or $20 a share with 45 million shares. A rival with the same $1.2 billion enterprise value but $100 million of net cash would leave $1.3 billion to its shareholders.
Hypothetical numbers, for illustration only.
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