EV/Sales
Enterprise value to revenue — valuation lens for companies without earnings yet.
Definition
EV/Sales (also EV/Revenue) is enterprise value divided by trailing or forward revenue. It is the multiple of choice for companies with negative or unstable earnings — early-stage SaaS, biotech, growth-at-all-costs internet — because revenue is far less volatile and harder to manipulate than EBITDA or EPS. It must be interpreted alongside gross margin: a 10x EV/Sales is reasonable for an 80%-margin SaaS but absurd for a 20%-margin distributor.
Formula
EV/Sales = (Market Cap + Total Debt - Cash) / Revenue
Forward variant uses next-12-month revenue.Worked example
A SaaS company has EV of $5B and trailing revenue of $400M: EV/Sales = 12.5x. Peers trade at 8-10x. Layered with its 85% gross margin and 30% growth, the premium may still be justified — or not, depending on Rule-of-40 score.
How ARIA Analyst uses it
ARIA applies EV/Sales for SaaS, biotech and early-stage tech, and combines it with the Rule-of-40 (growth + FCF margin) in the Valuation Agent.
Related terms
EV/EBITDA
Enterprise value divided by EBITDA — a capital-structure-neutral cash earnings multiple.
Gross Margin
Revenue minus cost of goods sold, divided by revenue — the pricing-power signal.
P/E Ratio
Share price divided by earnings per share — the most popular valuation multiple.
Discounted Cash Flow (DCF)
Intrinsic value of an asset as the present value of its future cash flows.
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