Before we dive in, let’s break down what Enterprise Value (EV) really means.
Enterprise Value represents a company’s total worth—taking into account both its equity and debt, while also factoring in its cash holdings. It’s essentially what it would cost to acquire the entire business. The formula is simple:
Enterprise Value = Market Cap + Total Debt – Cash
Why Does This Matter?
If you’re a mean reversion or overextension trader who likes to find “value” opportunities, this is a key metric that can influence your decision-making.
Let’s take Zoom ($ZM) as an example. Heading into 2024, the market punished Zoom for pivoting from a mass-market product to a more enterprise-focused model—even though their quarterly numbers looked strong. The stock dropped, but if you looked deeper, their enterprise value dropped significantly below their market cap. That could’ve been a sign to get interested—or at least start watching for a technical setup to go long.
Why It Works
Stocks trading with a lower enterprise value than market cap often have one thing in common: lots of cash and little to no debt. In other words, they’re usually financially healthy.
And companies with that kind of balance sheet? They’ve got options.
- They can buy back stock
- Issue a special dividend
- Or just sit on the cash until an opportunity comes along—whether it’s pushing into paid marketing or acquiring another business
That’s why this is one screener you’ll want to run every single week.
How To Screen For It
StockAnalysis.com, which costs just $8.99/month with our exclusive offer, makes it simple. Use the “Net Cash / Debt” filter and set it to greater than 0 to find companies with more cash than debt.
Want to go even deeper? Here’s the full set of filters used in this typical “Value Buy” or “Overextension” screener:
- U.S.-listed stocks
- Average volume over 3 million
- Market cap over $300 million
- Down at least 30% in the past year
- Exclude biotech (just a personal rule—biotech isn’t my thing)
This narrows the list to just a handful of names each week—often the same ones. That gives you time to really dig into them by reading press releases and quarterly reports, looking for something the market might be missing.
Final Thoughts
Understanding enterprise value—and knowing how to scan for stocks where EV < Market Cap—can help surface overlooked opportunities. StockAnalysis makes that easy with a simple interface, smart filters, and affordable access.
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