Market capitalization (or “market cap”) is the total value of a company’s outstanding stock. It is calculated by multiplying the market price of a single share by the total number of outstanding shares. In other words, it’s the collective worth of all shares of a company at any given time.
On the other hand, enterprise value (EV) looks at the entire capital structure of a business and considers ownership debt as well as investor equity. An easy way to think about this is to combine market cap with the amount of money owed by the company—debt—to arrive at an accurate value of the underlying business. All things considered, EV offers a more complete picture of the real economic value of a company.