Definition

EV/Sales compares a company's enterprise value to its total revenue, showing how expensive the business is relative to its sales. Unlike P/S, it accounts for debt and cash, making it more useful for comparing companies with different capital structures. A low EV/Sales may signal undervaluation or thin margins, while a high ratio reflects strong growth expectations. The ideal range varies significantly by sector — software and cloud companies can trade at 5–10×, while retail and utilities typically trade at 0.5–2×.