EV/Sales (Enterprise Value to Sales)

EV/Sales (Enterprise Value to Sales) is a financial valuation metric that compares a company’s enterprise value (EV) to its total sales or revenue. It is calculated by dividing the enterprise value by the company’s sales, providing a measure of how much investors are willing to pay for each dollar of sales. This ratio is useful for comparing companies within the same industry, especially when profits are not yet significant, such as in early-stage or high-growth companies. A lower EV/Sales ratio suggests that a company may be undervalued, while a higher ratio may indicate overvaluation.

Example

If a company has an EV of $500 million and sales of $250 million, its EV/Sales ratio is 2, indicating that investors are willing to pay $2 for every dollar of the company’s sales.