How Public Companies Are Evaluated

Foundry Manufacturing is privately held — there is no ticker, no share price scrolling across a screen, no daily verdict from the market. So why would anyone at Foundry care how public companies get valued? Because the same machinery that prices a listed company is exactly what sets Foundry’s own worth the moment a bank sizes a loan or a buyer comes knocking. This module uses a listed peer to show what a share and a market cap really are, why the price lurches on results day, and the two valuation multiples — P/E and EV/EBITDA — that investors quote. Then we turn those same multiples on Foundry.

Why the share price matters

Foundry’s closest listed comparable is Meridian Metals, a public precision-parts maker several times Foundry’s size. A private company like Foundry is owned by a small circle — its founders, a couple of investors, the bank as a lender. When a company like Meridian goes public through an IPO (initial public offering), it sells slices of ownership to thousands of shareholders who can buy and sell any day. In exchange for that capital, leadership takes on a new boss: the market. The share price then sets the value of employees’ stock, shapes how much the company can raise, and becomes the scoreboard executives are judged against every quarter.

Shares, shareholders and market cap

A share is simply a unit of ownership. Own 500 shares of Meridian and, against 250 million shares outstanding, you own one five-hundred-thousandth of it. The share price is what one share trades for right now, and the market cap (market capitalization) is the whole company’s value as judged by the market: share price × number of shares. Meridian at an $80 share price across 250 million shares is a $20 billion market cap.

Here’s the subtlety that trips people up: price is not the same as value. The share price reflects what buyers and sellers agree on today, driven by expectations about the future — not just what the business is worth on paper. That’s why price can swing on news and mood while the underlying company barely changes overnight.

Quarterly expectations: beat or miss

Four times a year, a public company like Meridian reports its quarterly results and holds an earnings call where executives walk investors through the numbers and give guidance about the future. What moves the price is rarely the raw figure — it’s the surprise against what investors already expected. Meridian can post record profit and still watch its stock fall if the market hoped for even more. That’s why results day can feel baffling from the inside: the market had already priced in “great,” so merely great disappoints. Foundry, private, escapes this theater — but a buyer will still probe whether its earnings are trending up or down before naming a price.

The two multiples people quote

To judge whether a stock is cheap or expensive, investors rarely look at the price alone — they compare it to what the company earns, using a multiple.

The P/E ratio — price to earnings — divides the share price by earnings (profit) per share. Meridian at $80 with $4 of earnings per share has a P/E of 20×: investors pay $20 for every $1 of annual profit. A high P/E usually means the market expects fast growth; a low one can mean a bargain or a struggling business.

EV/EBITDA takes a wider view. EV is enterprise value — the worth of the whole business, including its debt, not just the shares. EBITDA is the operating-profit proxy you met in EBITDA and ‘adjusted’ earnings. Meridian at 12× EV/EBITDA is valued at twelve times its annual operating earnings. Investors like it because it compares businesses fairly even when they carry very different amounts of debt or pay different tax rates.

What this means for Foundry

Foundry has no share price and no market cap — but a lender or an acquirer values it exactly the way the market values Meridian: pick the relevant multiple, multiply by Foundry’s own profit. The twist is that a small, privately held, capital-heavy manufacturer doesn’t command a big listed peer’s premium multiples. Deals for companies like Foundry land closer to ~8× EV/EBITDA and ~15× P/E — a discount to Meridian for size, illiquidity, and the debt on the books.

Turn those on Foundry’s numbers. Its EBITDA is $1.8M, so at 8× EV/EBITDA the implied enterprise value is 8 × $1.8M = $14.4M. Its net income is $600k, so at 15× P/E the implied equity value is 15 × $600k ≈ $9.0M. Notice those measure different things — one is the whole business, the other is only the owners’ slice after debt — which is why they don’t match. The full valuation, including the net-debt bridge that reconciles them into a range, is the capstone: valuation, acquisitions and due diligence.

Remember: a share price tracks expectations about the future, not how hard the team worked this week — and a multiple only means something in context, next to peers and the company’s own history. The very same multiples that price public Meridian are what put a number on private Foundry.

Spot the concept

Read each scenario and decide what it is — a share, market cap, P/E, or EV/EBITDA? Tap a card to flip it and check your answer.

Sort the items

Drag each item into the bucket it belongs to — or tap an item, then tap a bucket. Hit Check placement when you’re done.

How to use it

When a stock moves, resist reading it as a verdict on your work — ask what it moved against. Useful phrases: “Did we beat or miss expectations?” “What did guidance say about next quarter?” “What P/E are we trading at versus our peers?” “Is that an EV/EBITDA or a P/E number?” A multiple quoted with no comparison is half a sentence — the follow-up is always “compared to what?” And when the talk turns to what Foundry itself is worth, you can now do the mental math out loud: EBITDA times a peer multiple gives the enterprise value, and net income times a P/E gives the equity slice.