Market Capitalization or Enterprise Value?

Market capitalization corresponds to the value of shareholders' equity—that is, what belongs to the shareholders.
Enterprise value, on the other hand, adds this equity to net debt (financial debt minus available cash). It therefore reflects the total value of the company, including creditors.

The logic is simple: acquiring a company means taking over its assets, but also its debts, which will need to be repaid or refinanced. Enterprise value thus offers a more comprehensive estimate of the price to pay.

Four Main Scenarios

If the company has neither debt nor excess cash, market capitalization and enterprise value are virtually equivalent.
At the start of 2026, L'Oréal had roughly EUR 205 billion in both market capitalization and enterprise value. Its net debt (cash minus gross debt) is very low.

If the company has no debt but excess cash, enterprise value is lower than market capitalization.
Hermès International shows a market capitalization of EUR 230 billion but an enterprise value of EUR 217.6 billion. The explanation lies in its net cash surplus, which amounts to EUR 12 billion. In reality, Hermès had debt slightly above EUR 2 billion at the end of 2024, but its cash far exceeds this amount.

If the company is heavily indebted, market capitalization is well below enterprise value.
This is the case for Orange : the group's business model, which requires significant investment, means its debt is substantial. Based on figures from early 2026, the operator's market capitalization is EUR 39.27 billion, but its enterprise value is EUR 67.4 billion, as analysts estimate net debt at EUR 28.11 billion at the end of 2025. Nevertheless, Orange does not appear to be over-indebted, since it is able to offset its debt repayments with significant recurring income.

If indebtedness is critical and solvency is threatened, equity is worth almost nothing, while enterprise value remains high: creditors have, in effect, taken control.
This is the situation for Emeis (formerly Orpea), which had to launch a severe financial restructuring at the expense of its shareholders. Even after converting part of its debt into shares, the company's ratios remain unbalanced: market capitalization stands at EUR 2.2 billion, but enterprise value is EUR 7.5 billion, due to debt exceeding EUR 5 billion. But unlike Orange, the quality of Emeis' results is questionable, which explains the market's caution.

Which Metric Should Be Used to Value a Company?

The reasonable answer is: as many metrics as possible. For profitable, growing companies with no refinancing concerns, market capitalization remains a relevant benchmark—many financial ratios are built upon it.
For companies that are weakened, indebted, or facing headwinds, enterprise value makes more sense.
But in both cases, comparing several ratios will provide a more refined analysis.
Here is the key takeaway:
Market capitalization tells you what the shares are worth
Enterprise value tells you what the company as a whole is worth
The more debt matters, the more relevant enterprise value becomes