Market Cap Vs. Enterprise Value

        Before buying a stock, you always want to consider their market caps and enterprise values. These two figures often tell you the size of the company, how big it is in relations to others, and how well it is doing. There are also many other factors to consider when evaluating a company, but for now, we will focus on market cap and enterprise value.
        Market cap is how much the stock market considers a company is worth. Enterprise value is how much the company is actually worth. Usually, you want the market cap to be lower so that the company is undervalued. If it is higher, it either means that other investors feel that the company has potential, or it is overvalued. These values should play a large role when choosing your investments.
        In addition, you should consider debt and cash. The difference between a company's market cap and enterprise value could be because of these two factors. If a company has taken on a lot of debt, its market cap will generally be lower due to the fact that it will have to pay back that money. If a company has a large amount of cash, its market cap will be higher because the cash counts as part of the company's assets. If a company has similar values for its debt and cash, they usually balance out. In those cases, the market cap and enterprise value will balance out.
        Companies that are smaller are generally dangerous investments because they can easily go bankrupt. However, if you are lucky enough to choose a good one, you could earn a lot of money. Larger companies tend to be more stable investments, but many of them are so big that they dominate the industry. They don't have a lot of room to grow.

Disclaimer: Trading stocks has extremely high risks, and should not be taken to lightly without a thorough understanding. This is written from a purely commentary point of view and is not meant to suggest buying, selling, or holding a stock. All traders must do their own research prior to investing. We (StockQuests) are unaffiliated with all of the companies that are mentioned on this blog, and can't be held responsible for any losses that may occur. Invest at your own risk.