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If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.
Follow me on Twitter and YouTubeTwitter Handle: @TreyHenninger
YouTube Channel: DIY Investing
Support the Podcast on PatreonThis is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron.
You can find out more information by listening to episode 11 of this podcast.
Show OutlineThe full show notes for this episode are available at https://www.diyinvesting.org/Episode102
Enterprise Value DefinitionEnterprise Value = Market Cap + Net Debt or Market Cap - Net Cash
Key Thesis: Instead of using Enterprise Value, I would rather use Market Capitalization and have excess cash be part of my margin of safety.
When Cash > Debt use Market Cap.
When Debt > Cash use Enterprise Value.
This is a conservative approach.
Why is Enterprise Value useful?Corporate takeovers because you have to assume the debt, not just buy out the equity. On the flip side, if you take over a company you get access to the cash box.
This doesn't apply to minority shareholders.
"Net Cash or Skip" Investing ApproachBe conservative when valuing companies. Don't give managers credit where they don't deserve it. Enterprise value should only be used when companies hold debt. Yet, you should only buy companies with net cash.
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3737 ratings
If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.
Follow me on Twitter and YouTubeTwitter Handle: @TreyHenninger
YouTube Channel: DIY Investing
Support the Podcast on PatreonThis is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron.
You can find out more information by listening to episode 11 of this podcast.
Show OutlineThe full show notes for this episode are available at https://www.diyinvesting.org/Episode102
Enterprise Value DefinitionEnterprise Value = Market Cap + Net Debt or Market Cap - Net Cash
Key Thesis: Instead of using Enterprise Value, I would rather use Market Capitalization and have excess cash be part of my margin of safety.
When Cash > Debt use Market Cap.
When Debt > Cash use Enterprise Value.
This is a conservative approach.
Why is Enterprise Value useful?Corporate takeovers because you have to assume the debt, not just buy out the equity. On the flip side, if you take over a company you get access to the cash box.
This doesn't apply to minority shareholders.
"Net Cash or Skip" Investing ApproachBe conservative when valuing companies. Don't give managers credit where they don't deserve it. Enterprise value should only be used when companies hold debt. Yet, you should only buy companies with net cash.