How do you analyze enterprise value?
The enterprise value of a company shows how much money would be needed to buy that company. EV is calculated by adding market capitalization and total debt, then subtracting all cash and cash equivalents.
What is a good enterprise value?
The enterprise-value-to-EBITDA ratio is calculated by dividing EV by EBITDA or earnings before interest, taxes, depreciation, and amortization. Typically, EV/EBITDA values below 10 are seen as healthy.
What if enterprise value is negative?
Simply put, a negative enterprise value means that a company has more cash than it would need to pay off any debt and buy back all its stocks in one go, if it really wanted to.
Is a higher or lower EV EBITDA better?
Usually, a low EV/EBITDA ratio could mean that a stock is potentially undervalued while a high EV/EBITDA will mean a stock is possibly over-priced. In other words, the lower the EV/EBITDA, the more attractive the stock is. Generally, EV/EBITDA of less than 10 is considered healthy.