Fundamental Glossary / Valuation Ratios
EV/Sales Ratio
Enterprise value divided by revenue. It prices the operating business, including debt, against sales.
Formula
Enterprise value / revenue.
What it means
EV/Sales answers the question P/S leaves open: what is the whole firm worth relative to the sales it produces, after giving lenders their claim.
It is common for loss-making companies and for takeovers, because a buyer inherits the debt.
How to read it
Read it with the margin. EV/Sales of 1 with a 20% operating margin is a different business from EV/Sales of 1 with a 2% margin. The second may be expensive once costs are counted.
What to watch
Revenue recognition choices, gross versus net accounting, and acquisitions mid-year all change sales. Match the sales period to a current enterprise value, and do not annualise a quarter that is not typical.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.