Difference between enterprise value and market capitalization
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Courtesy - Investopedia
Enterprise value and market capitalization each measure a company's
market value. The two calculations are not identical, and the terms are
certainly not interchangeable. However, each offers a peek at a
company's overall value and a way to compare similar companies. These
numbers are also helpful in determining a fair price to pay for shares
of a particular company.
Market capitalization provides an idea of the size of the business and makes it easy to identify peers within a sector. It also demonstrates that share price alone is not a gauge of a company's overall value. Just because a stock has a high share price does not necessarily mean the company is worth more.
Market capitalization omits important factors in the overall valuation of a company. For example, if a company were to be purchased, market capitalization would only reflect the cost to acquire the outstanding equity. In reality, the new owner would also become responsible for all outstanding debt. Enterprise value calculates a more accurate value of a company, taking into consideration its debt obligations. To calculate enterprise value, add market capitalization to the company's outstanding preferred stock and all debt obligations, then subtract cash and cash equivalents.
Enterprise value is very commonly used in value investing to
identify undervalued companies. A company with good earnings and
possibly even a solid dividend may sound very appealing to many
investors. This company might also have a large market capitalization.
However, if you look further and calculate the company's enterprise
value, you may find serious debt obligations that could pose a problem.
If you compare the enterprise value of an equally well-earning company
and find it has a higher enterprise value, purchasing the latter stock
would be a better overall value.
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Hello and very very good morning sir, Its really surprising me that there are people who had been subscribe like HBJ , DSIJ, STOCK GURU etc even getting call from them but what wondering me as soon as they got call from research agency the same script being query on this board even on same day. its means people are not at all having any confidence on any of research agency. That because people do not want to do any home work. I like your comment much "DO NOT BUY ANY SCRIPT WHICH STEAL YOUR COMFORT" means study and have confidence and buy. Sir my query about global situation crude is falling people are talking about global slow down how does its affect indian econom? what type of step indian govt must take? Why govt is not reducing petrol and Diesel price? kindly Give your Opinion? Thank you Sir Jee. GOD BLESS YOU
ReplyDeleteI think ,Indian Economy will actually benefit from a mild recession in western world.
DeleteSir,
ReplyDeleteCan Shakti Pimps be bought at CMP???
Already recommended around Rs.50 level , at CMP Rs.215 neutral on it.
DeleteSir,
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At CMP, Liberty returned 130 % in last on year which is very good on any parameter. Correction and consolidation is part of any market.
DeleteDear VP Sir,
ReplyDeleteGiven the appreciation in Wimplast since your recommendation, would you still advice holding on or book profit or add more.
Thanks
Stock already turned as a multi bagger from suggested level . May take out at least cost
DeleteSir,
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Thanks
In a potential industry but rate is not cheap.
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Not tracking it
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It can be a good add on sheet.
Export subsidy is available in every year as per existing norms.
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ReplyDeleteVP, I see that few of the Oil Exploration companies Selan, Aban Offshore all are at available at very low rates due to fall in crude prices. Are these good buys right now ?, or you will ring the bell when the time is right ?
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ReplyDeleteAt least five times I suggested to all holding Bilcare to send a mail to me and explained my stand individually
Delete