Following a turbulent week on the Australian share market last week, I went in search for some bargains.

One of my favourite starting points, when I’m looking for value, is Enterprise Value (EV).

What is Enterprise Value?

Think of enterprise value as the theoretical takeover price. In the event of a buy out, an acquirer would have to take on the company’s debt, but would pocket its cash.

EV differs significantly from simple market capitalisation in several ways, and many consider it to be a more accurate representation of a firm’s value.

The value of a firm’s debt, for example, would need to be paid by the buyer when taking over a company, thus EV provides a much more accurate takeover valuation because it includes debt in its value calculation.

EV is just the starting point. The company also needs to be cheap, with a low price to earnings ratio (P/E) and a low price to book ratio (P/B). It needs to have a solid capital structure, which is represented by a low debt to equity ratio, and positive cash flows.

You’ll notice that often these companies have been severely punished in out-of-favour sectors but, if you’re prepared to go against the crowd and you’re patient, you may see significant returns.

The price to book ratio (P/B) doesn’t work well with the Financials and A-REITs, so I’ve excluded them from my findings.

Here are 5 stocks that meet all of my criteria:

Company Market Cap $ EV $ P/E Ratio  P/B Ratio % (*)Net Debt/Equity %
OZ Minerals Limited (ASX: OZL) 1.07B 664M 11.52 0.48 negative
Independence Group NL (ASX: IGO) 1.1B 963M 11.75 0.76 negative
Fairfax Media Limited (ASX: FXJ) 1.96B 1.9B 12.67 0.99 negative
CSR Limited (ASX: CSR) 1.29B 1.22B 8.18 1.13 negative
Evolution Mining Limited (ASX:EVN) 2.04B 1.83B 7.36 1.23 negative

(*) A negative debt to equity ratio means that the company’s debt minus its cash, divided by its equity is negative. That’s a good thing!

OZ Minerals Limited

OZ Minerals Limited is an Australia-based mining company with a focus on copper. The company’s principal activities are mining of copper, gold and silver, carrying out exploration activities and development of mining projects.

The company is selling for $1.07 Billion, compared to its EV of $664 Million. It has a low P/E ratio of 11.52 and a P/B under 1. Its debt to equity is negative, which is excellent.

Independence Group NL

Independence Group NL is engaged in mineral exploration, nickel, copper and zinc mining and the development of the Tropicana Gold Project. The company operates in four segments: nickel mining, copper and zinc mining, Tropicana Gold Project, and feasibility and regional exploration activities.

The company is selling for $1.1 Billion, compared to its EV of $963 Million. It has a low P/E ratio of 11.75 and a P/B under 1. Its debt to equity is negative, which is excellent.

Fairfax Media Limited

Fairfax Media Limited is an Australia-based multi-platform media, marketing services and real estate services company. The company is engaged in publishing of news, information and entertainment; advertising sales in print and digital formats, and radio broadcasting.

The company is selling for $1.96 Billion compared to its EV of $1.9 Billion. It has a low P/E ratio of 12.67 and a P/B under 1. Its debt to equity is negative, which is excellent.

CSR Limited

CSR Limited (CSR) is an Australia-based company engaged in the manufacture and supply of building products in Australia and New Zealand. The company operates through four segments: Building Products, Glass, Aluminium and Property.

The company is selling for $1.29 Billion compared to its EV of $1.22 Billion. It has a low P/E ratio of 8.18 and a P/B just over 1. Its debt to equity is negative, which is excellent.

Evolution Mining Limited

Evolution Mining Limited engages in identifying, developing, and operating gold related mining projects in Australia and New Zealand. It owns and operates seven gold mines in Cowal in New South Wales; Cracow, Pajingo, Mt Carlton, and Mt Rawdon in Queensland; and Edna May and Mungari in Western Australia. It primarily explores for gold, silver, and copper.

The company is selling for $2.04 Billion compared to its EV of $1.83 Billion. It has a low P/E ratio of 7.36 and a P/B just over 1. Its debt to equity is negative, which is excellent.

Discover the 'new breed' of blue chips that could take your portfolio higher in 2016

Forget BHP and Woolworths. These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor John Hopkins has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.