Greg~oh, great, leave ME with FATS lol
I will let you calculate FATS Enterprise Value my guess it is huge
Ok, ...I'll do a comparision for ya..
But I have reworked your numbers using .25 (rather than .43 as you could easily say that number *could be* .10 or 1.00... gotta use the current price or as close to it as you can)
Also, I will use your O/S as provided and debt as provided but you should be aware that the formula is;
Market cap = current share price X total shares outstanding
Debt = long-term debt + short-term debt
Enterprise value = market capitalization - cash & equivalents + debt
Using your numbers and .25/share I came to $14.177357M
That is .6716/share EV or 2.686 x share price
(FATS was actually easier as I pulled their numbers as provided by Reuters; VALUATION MEASURES Market Cap (intraday): 57.53M ... Enterprise Value (8-Apr-04)³: 83.96M)
... or 1.459 x share price
So which company is the better buy?
(That is not a loaded question lol ... I know you are tempted to factor in superior technology but that is not what EV is all about <g>)
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Funny you should use the FOOL (so do I) and a little different slant on the same matrix;
Q. Can you explain enterprise value?
A. Enterprise value (EV) represents a company's economic value -- the minimum someone would have to pay to buy it outright. It's an important number to consider when you're valuing a stock.
You may remember that market capitalization (the current stock price multiplied by the number of shares outstanding) also serves as a price tag for a company. That's true, but market cap ignores debt, and with some companies, debt is substantial and changes the picture significantly. Enterprise value is a modification of market cap, incorporating debt.
To understand the concept of enterprise value better, imagine that you're looking at two companies that have equal market caps. One has no debt on its balance sheet, while the other one is rather debt-heavy. Whoever owns the latter company will be stuck making lots of interest payments over the years -- so you probably wouldn't pay the same price for each company.
By the same token, imagine that you have two companies with equal market caps of $50 billion and no debt. One has negligible cash and cash equivalents on-hand, and the other has $5 billion in cash in its coffers. If you bought the first company for $50 billion, you'd have a company worth, presumably, $50 billion. But if you bought the second company for $50 billion, it would've cost you just $45 billion, since you instantly have $5 billion in cash. These are the kinds of things enterprise value takes into account.
Let's examine the Walt Disney Co., using its quarterly earnings report for the quarter ended in March 2002. Its 2 billion shares, at a recent stock price at the time of this writing of about $18, yield a market cap of $36 billion. To that, we add its $14.8 billion in debt and subtract its $1.9 billion in cash and cash equivalents. The result is $49 billion, a significantly higher number than the market cap.
Debt can make a big difference. If you paid $36 billion for Disney, you would actually end up with a total bill of $49 billion, because the company comes with a lot of debt. The enterprise value reminds all investors, large and small, that debt is a cost to the business.
Company Price Tags; Understanding enterprise value
By Selena Maranjian
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best!
kp
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