Market cap vs. enterprise value
Market cap is the price of the shares. Enterprise value is the price of the business. They can be very different.
Market cap
Market cap is what the stock market says all the shares are worth together. It's the number in headlines ("NVIDIA nears $6 trillion").
A $25 stock isn't "cheaper" than a $960 stock. Share price alone tells you nothing. Costco at ~$960 and GameStop at ~$25 just have very different numbers of shares.
Enterprise value
Imagine buying a whole house. The listing says $500,000, but:
- There's a $100,000 mortgage you must take over. Your real cost is higher: add debt.
- There's $50,000 in a safe in the basement that comes with it. Your real cost is lower: subtract cash.
Real cost: $500k + $100k − $50k = $550k. That's enterprise value. It's the price of the operating business with the financing stripped out.
GameStop: where the gap is huge
Market cap from early October 2026 price (~$24.70 × ~504M shares). Cash and debt from the January 31, 2026 balance sheet, so treat EV as approximate.
| Piece | Amount |
|---|---|
| Market cap | ~$12.5B |
| + Long-term debt (convertible notes) | +$4.2B |
| − Cash, equivalents and marketable securities | −$9.0B |
| ≈ Enterprise value | ~$7.6B |
GameStop also held about $368M of bitcoin and related receivables. Some analysts would subtract that too.
Now the interesting part. Compare EV with what the operating business earns:
- Fiscal 2025 operating income: $232M (or $290M "adjusted").
- EV ÷ operating income: roughly 26× to 33×.
Stripping out the cash doesn't make GameStop look cheap. It shows that you're paying a full price for a retail business whose sales fell from $3.82B to $3.63B in a year. The cash is real, but the question becomes what management does with it.
Costco and NVIDIA: small gaps
- Costco ended fiscal 2026 with about $20B of cash against a market cap of roughly $425B. Its long-term debt is much smaller than its cash, so EV lands a bit below market cap.
- NVIDIA's cash and debt are tiny compared to a ~$5.8T market cap. EV and market cap are nearly the same.
EV multiples
Because EV ignores how a company is financed, it pairs with profit measures that also ignore financing:
| Multiple | Pairs | Use it when |
|---|---|---|
| P/E | Market cap ÷ Net income | Most mature companies with normal debt |
| EV/EBIT | EV ÷ Operating income | Companies with lots of cash or debt |
| EV/EBITDA | EV ÷ EBITDA | Comparing companies with very different debt or depreciation |
| EV/Sales | EV ÷ Revenue | Young companies with little or no profit yet |