EV to Sales
Enterprise value divided by annual revenue, a capital-structure-neutral version of the price-to-sales ratio.
Formula
EV/Sales = Enterprise Value / Annual Revenue
Unit
ratio (x, times)
In depth
EV-to-sales is the right way to value on revenue when companies carry different amounts of debt, because it counts the debt an acquirer would inherit. It is used for loss-making businesses and for cyclical troughs where earnings multiples break down. The comparison is only meaningful within an industry, and even then only between companies with similar margin structures, since revenue that converts to 25% margins is worth several times revenue that converts to 4%. Pairing it with margin data is not optional; the ratio alone invites the conclusion that all revenue is equal.
Worked example
Enterprise value ₹2,200 crore on revenue of ₹1,000 crore gives EV/Sales of 2.2. A debt-free peer at a market capitalisation of ₹2,200 crore on the same revenue shows the identical ratio while carrying none of the ₹500 crore of borrowings.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “EV to Sales” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.