Term · Valuation
Equity Value
In briefEquity value is the portion of enterprise value attributable to shareholders after deducting the claims of other capital providers. For small caps, options, convertibles, pension liabilities, and minority interests can noticeably change the value per share.
Definition
Equity value is the value attributed to shareholders after taking into account the claims of other capital providers and other adjustments.
How it is calculated
Formula. Simplified: equity value = enterprise value − net debt − minority interests − further equity-like claims + non-operating assets.
Why it matters for small caps
For small caps, convertible instruments, pension deficits, minorities, and options can substantially change the value per share.
Common misreadings
- Enterprise value and equity value are frequently confused. A valuation at the enterprise level must not be compared with market capitalization without a reconciliation.
In the process
Frequently asked
What is equity value?
It denotes the enterprise value that accrues to shareholders after accounting for other capital providers. Economically, it corresponds to the value of equity.
How is equity value derived?
From enterprise value you subtract net debt, minorities, and equity-like claims and add non-operating assets. The result is the value attributable to shareholders.
Why must equity value and enterprise value not be confused?
A valuation at the enterprise level cannot be compared with market capitalization without a reconciliation. Without this bridge, gross valuation errors arise.
Related terms
Sources
Primary
NYU Stern – Aswath Damodaran, Valuation Resources
https://pages.stern.nyu.edu/\~adamodar/
https://pages.stern.nyu.edu/\~adamodar/
Methodology
IFRS Foundation – IFRS 3 Business Combinations
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-3-business-combinations/
https://www.ifrs.org/issued-standards/list-of-standards/ifrs-3-business-combinations/
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.