EV/Sales Ratio Calculator

Enterprise Value to Sales (EV/Sales or EV/Revenue)

The EV/Sales ratio compares a company’s total enterprise value to its annual revenue. Unlike the Price-to-Sales (P/S) ratio, EV/Sales accounts for a company’s debt and cash, giving a cleaner picture of the true business value relative to its revenue.

Formula:

Enterprise Value = Market Capitalization + Total Debt - Cash and Cash Equivalents

EV/Sales = Enterprise Value / Annual Revenue

Why use EV instead of market cap?

Two companies can have the same market cap but very different levels of debt. A company with $1B in debt and a $500M market cap has an enterprise value of $1.5B — an acquirer would have to take on that debt. EV/Sales captures this.

Interpretation by industry:

EV/Sales vs P/S:

• P/S is simpler and uses only market cap and revenue
• EV/Sales is more accurate for comparing companies with different capital structures
• For debt-free companies with little cash, both give similar results

How to interpret:

• Low EV/Sales: cheap relative to revenue: but check margin quality
• High EV/Sales: market expects strong growth or premium margins
• Always compare within the same industry

Example:

• Market cap: $2B, Debt: $500M, Cash: $200M, Revenue: $800M
• EV = $2B + $500M - $200M = $2.3B
• EV/Sales = $2.3B / $0.8B = 2.88x

High-margin businesses justify higher multiples. A SaaS company at 10x EV/Sales may be cheaper than a retailer at 1x if margins differ dramatically.