Definition
EV/Sales measures how much investors pay for each dollar of revenue including debt. Unlike P/S ratio, it accounts for different capital structures, making it better for comparing companies with varying debt levels. It's particularly useful for unprofitable growth companies.
Formula
EV/Sales = Enterprise Value / Annual Revenue
Example
A company with $5 billion enterprise value and $1 billion revenue has EV/Sales of 5x. High-growth SaaS companies may trade at 10-20x EV/Sales.
FAQ
What is EV/Sales (EV/Revenue)?
A valuation multiple comparing enterprise value to total revenue.
How do you calculate EV/Sales (EV/Revenue)?
A common formula for EV/Sales (EV/Revenue) is: EV/Sales = Enterprise Value / Annual Revenue
Why is EV/Sales (EV/Revenue) important?
EV/Sales (EV/Revenue) helps investors evaluate valuation and make more informed decisions.