Silly question relating to company valuation
Hi guys,
I'm clearly missing out on something as I'm a bit confused about something. Sorry, this might sound silly:
To value public companies (find the enterprise value), why can't you just find the equity value (by current share price x fully diluted outstanding shares), and then just add debt, minority interest, preferred stock and subtract cash & cash equivalents to get enterprise value?
This doesn't use any of the 4 main valuation methods, I am prob missing out on why the above can't be done. Would really appreciate it someone could explain why not.
Also, another quick question please, is it possible to have the equity value of a private company. And if yes, how do you calculate it.
Thank you for your help
Enterprise value is based off market values of the company's equity. It technically is the value of the company, but the 4 main valuation methods are meant to be used to arrive at your own valuation, and can help you make sure the market is not under or overvaluing a particular company.
As for equity value of a private company - assuming you have all the necessary data points - you have to estimate this yourself with a valuation. However, financing rounds can also point to what investors think the market value of a private company should be. It's tough here because the information available to you is very limited.
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