Market cap and enterprise value (EV) are the two most-used valuation metrics — and they can lead to very different conclusions about a company's size. Market cap is the value of a company's equity to shareholders. Enterprise value is the theoretical price to buy the whole business — equity plus debt, minus cash.
Market Cap = Share Price × Shares Outstanding
Enterprise Value = Market Cap + Total Debt + Preferred Equity + Minority Interest − Cash & Equivalents
Use market cap when ranking companies by size, weighting indices, or computing shareholder-focused ratios like P/E. Use enterprise value when comparing companies with different debt loads, computing EV/EBITDA or EV/Sales multiples, or estimating an acquisition price.
Two companies with the same $100B market cap can have very different enterprise values: a cash-rich company with $30B cash and $5B debt has an EV of $75B, while a debt-heavy company with $2B cash and $40B debt has an EV of $138B — an 84% difference despite identical market caps.
Related: What Is Market Cap? · Top Companies by Market Cap