One of my favourite metrics for finding undervalued shares on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO), is the Enterprise Multiple (EM).

The EM heavily favours companies with lots of cash compared to their debt and these are the types of companies I really like. The EM looks at companies through the eyes of a potential acquirer.

The EM uses Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) in the calculation which makes it easier to compare across companies, industries and sectors. EBITDA excludes special items that a company does not expect to recur in future years and ensures that earnings are only specific to operations.

To calculate EM you simply:

• Add total debt (long and short-term debt)
• Subtract cash and cash equivalents

This gives you the Enterprise Value (EV) which you divide by the company’s EBITDA and you have your Enterprise Multiple.

Today, I’ve compiled a list of 23 shares and their enterprise multiples, looking for the most undervalued share on the ASX200. I’ve deliberately excluded financials, A-REITS, and utilities from this analysis.

To demonstrate how I reached the Enterprise Multiple in the table below, let’s use Rio Tinto Limited (ASX: RIO) from the list as a real-life example:

• Rio has a market capitalisation of \$17.1 billion
• Short term debt of \$2.4 billion debt
• Long term debt of \$21.1 billion
• Cash and cash equivalents of \$9.3 billion

To calculate the EM, we start with the market cap \$17.1 billion, add the total debt of \$23.6 billion, subtract cash of \$9.3 billion, and we end up with an EV of \$31.4 billion. Then we divide the EV (\$31.4 billion) by the company’s EBITDA (\$12.3 billion) and we get an EM of 2.54. The lower the multiple the better the value.

Here’s the list (All amounts are in millions, except for the EM):

 Company Cash (\$m) ST Debt (\$m) LT Debt (\$m) Net Debt (\$m) Market Cap (\$m) Enterprice Value (\$m) EBITDA (\$m) Enterprise Multiple OZ Minerals Limited (ASX: OZL) 552 (552) 1,360 808 479 1.69 Rio Tinto Limited (ASX: RIO) 9,366 2,484 21,140 14,258 17,170 31,428 12,370 2.54 BHP Billiton Limited (ASX: BHP) 6,753 3,201 27,969 24,417 48,460 72,877 20,440 3.57 Qantas Airways Limited (ASX: QAN) 2,908 771 4,791 2,654 7,880 10,534 2,160 4.88 Woodside Petroleum Limited (ASX: WPL) 155 1,065 2,906 3,816 21,920 25,736 4,550 5.66 Flight Centre Travel Group Ltd (ASX: FLT) 1,377 32 (1,345) 3,760 2,415 417 5.79 Cimic Group Ltd (ASX: CIM) 2,349 610 1,384 (355) 8,800 8,445 1,430 5.91 Woolworths Limited (ASX: WOW) 1,333 1,645 3,079 3,391 28,180 31,571 4,800 6.58 Aurizon Holdings Ltd (ASX: AZJ) 171 59 2,924 2,812 8,060 10,872 1,480 7.35 Telstra Corporation Ltd (ASX: TLS) 1,396 1,496 14,138 14,238 68,100 82,338 9,660 8.52 Oil Search Limited (ASX: OSH) 842 202 4,157 3,517 10,140 13,657 1,380 9.90 Newcrest Mining Limited (ASX: NCM) 258 4,019 3,761 12,490 16,251 1,570 10.35 Asciano Ltd (ASX: AIO) 127 3,649 3,522 8,630 12,152 1,050 11.57 Wesfarmers Ltd (ASX: WES) 711 1,913 4,615 5,817 47,780 53,597 4,510 11.88 Brambles Limited (ASX: BXB) 166 127 2,727 2,688 16,110 18,798 1,560 12.05 Amcor Limited (ASX: AMC) 704 1,012 2,572 2,880 14,160 17,040 1,360 12.53 Crown Resorts Ltd (ASX: CWN) 340 188 2,473 2,321 8,170 10,491 795 13.20 Ramsay Health Care Limited (ASX: RHC) 315 425 2,724 2,834 11,450 14,284 1,050 13.60 Caltex Australia Limited (ASX: CTX) 19 40 693 714 9,620 10,334 587 17.60 Sydney Airport Holdings Ltd (ASX: SYD) 526 474 6,983 6,931 14,220 21,151 977 21.65 ResMed Inc. (CHESS) (ASX: RMD) 658 1 400 (257) 11,260 11,003 493 22.32 Transurban Group (ASX: TCL) 1,889 616 11,593 10,320 21,790 32,110 1,300 24.70 CSL Limited (ASX: CSL) 556 3 2,277 1,724 47,810 49,534 1,920 25.80

(Source: Company Reports)

If it's undervalued shares you're looking for, 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.”