Below is an EV/Revenue calculator, or Enterprise Value to Sales Calculator. Enter a company's market capitalization, debt, cash (and equivalents), and top-line revenue to compute its EV/Sales.
Using the EV/Sales Calculator
Using a company's annual or quarterly report, fill in the following fields to compute its EV/EBIT ratio.
- Market capitalization: The total number of outstanding shares of the company multiplied by their value per share.
- Total debt: All short and long-term debt and liabilities listed on the balance sheet.
- Cash and Cash Equivalents: The balance statement's total cash and cash equivalents.
- Revenue: The top-line sales from the income statement.
Once done, hit the "Compute EV/Revenue" button to get the ratio – and Enterprise Value, as well.
What is the EV/Sales ratio?
EV/Sales, or the Enterprise Value to Sales ratio (EV/Revenue is used interchangeably), is a valuation ratio comparing the total capitalization of a company, including any cash or debt, to its top line revenue.
Revenue is the first line of the income statement, and the hardest number on there to adjust away, hide, or manipulate. While different companies have vastly different gross margin structures, all companies live and die on revenue coming into the company. What they do with it after that varies, (and in many cases you should look at gross profit or EV/Gross Profit or Price/Gross Profit instead) but what you pay per dollar of revenue always counts.
Comparison with Price to Sales
The Price to Sales ratio is an extremely important valuation metric, especially among companies which don't quite show profits. Growth companies, or young technology companies in general, can often be compared only using their top line sales and growth rates – and the multiple you pay per dollar of revenue is an important input metric to what you'll eventually earn from an investment.
However, price is a market capitalization metric – it only counts the equity value of a firm. Enterprise value improves on it by adding any debt the company has taken on, and netting out any cash on the balance sheet. While less popular that looking at revenue multiples with new valuation, if you do have visibility to compute enterprise value, all the better (a given for public companies... much harder on the private side, often).