Enterprise Value to Sales Calculator
Valuation Results
What Is Enterprise Value to Sales?
Enterprise Value to Sales (EV/Sales) compares a company’s total value to its annual revenue.
It answers one simple question:
How much are investors paying for every dollar of revenue?
Unlike price-to-sales, EV/Sales includes debt and cash. That makes it more complete and more accurate when comparing companies.
EV/Sales Formula
The formula has two parts.
Step 1: Calculate Enterprise Value (EV)
Enterprise Value = Market Capitalization + Total Debt − Cash
Step 2: Calculate EV/Sales
EV/Sales = Enterprise Value ÷ Annual Revenue
That’s it.
What Each Input Means in the Calculator
Your calculator uses four inputs:
1. Market Capitalization ($)
This is the total value of a company’s shares.
Formula:
Share Price × Total Shares Outstanding
Example:
If a company has 10 million shares at $50 each, market cap = $500 million.
2. Total Debt ($)
This includes:
- Long-term loans
- Bonds
- Short-term borrowings
Debt increases enterprise value because a buyer would have to pay it.
3. Cash & Cash Equivalents ($)
This includes:
- Cash on hand
- Bank balances
- Liquid short-term investments
Cash reduces enterprise value because it can offset debt.
4. Annual Revenue ($)
This is the company’s total yearly sales.
Important: Revenue must be greater than zero to calculate EV/Sales.
How the EV/Sales Calculator Works
Your calculator follows this logic:
- Adds Market Cap + Debt
- Subtracts Cash
- Divides the result by Annual Revenue
- Displays:
- Enterprise Value
- EV/Sales Multiple
- Valuation Status
It also categorizes the result into valuation levels.
Example Calculation
Let’s walk through a simple example.
- Market Cap = $500,000,000
- Total Debt = $100,000,000
- Cash = $50,000,000
- Revenue = $200,000,000
Step 1: Enterprise Value
EV = 500M + 100M − 50M
EV = 550M
Step 2: EV/Sales
EV/Sales = 550M ÷ 200M
EV/Sales = 2.75x
This means investors are paying $2.75 for every $1 of revenue.
How to Interpret EV/Sales Results
Your calculator classifies the multiple into ranges:
Negative EV
Distressed (Negative Enterprise Value)
This happens when cash is greater than market cap + debt. It often signals financial stress or deep undervaluation.
Less Than 2x
Potentially Undervalued / Low Growth
May indicate:
- Slower growth
- Market skepticism
- Possible opportunity
2x to 5x
Healthy / Fairly Valued
Common for:
- Stable businesses
- Moderate growth companies
5x to 10x
High Valuation / High Growth Expected
Often seen in:
- Technology companies
- SaaS firms
- Fast-growing startups
Investors expect strong future revenue growth.
Above 10x
Expensive / Speculative
This usually means:
- Very high growth expectations
- Strong brand dominance
- Market hype
Higher risk if growth slows.
Why Investors Use EV/Sales
EV/Sales is popular because:
1. It Works for Unprofitable Companies
Many startups and tech companies do not have profits yet. Earnings-based ratios like P/E don’t work well there.
EV/Sales solves that.
2. It Allows Fair Comparisons
Since EV includes debt and cash, it compares companies more fairly than price-based ratios.
Two companies may have the same revenue but very different debt levels. EV/Sales captures that difference.
3. It Is Common in SaaS and Tech Valuation
High-growth companies are often valued based on revenue multiples rather than profits.
When to Use an EV/Sales Calculator
Use it when:
- Comparing companies in the same industry
- Evaluating startups
- Analyzing high-growth stocks
- Screening potential investments
- Estimating acquisition value
It is especially useful when profits are low or negative.
Limitations of EV/Sales
No metric is perfect. EV/Sales has weaknesses.
1. It Ignores Profit Margins
A company with high revenue but low margins may look attractive on EV/Sales but still struggle financially.
2. It Ignores Cost Structure
Revenue alone does not tell you how efficiently the company operates.
3. Industry Differences Matter
A 4x multiple may be cheap in software but expensive in retail.
Always compare companies within the same industry.
EV/Sales vs Other Valuation Metrics
Here’s how it compares:
| Metric | Best For | Limitation |
|---|---|---|
| P/E Ratio | Profitable companies | Doesn’t work with losses |
| Price/Sales | Quick comparisons | Ignores debt |
| EV/EBITDA | Cash flow analysis | Not ideal for early startups |
| EV/Sales | Growth & SaaS companies | Ignores profitability |
EV/Sales sits in the middle. It is simple but more complete than price-to-sales.
Best Practices When Using EV/Sales
Follow these tips:
- Compare companies in the same sector
- Look at revenue growth rate
- Check profit margins
- Review debt levels
- Combine with EV/EBITDA or free cash flow
Never rely on one ratio alone.
Who Should Use an EV/Sales Calculator?
This tool is useful for:
- Retail investors
- Financial analysts
- Startup founders
- Venture capital professionals
- M&A advisors
- Business students
If you need a quick, structured valuation snapshot, this calculator helps.