EV/Revenue & EV/EBITDA Multiples

Company value as a multiple of revenue or earnings

What it is

These are valuation shortcuts that express a company's Enterprise Value (its total value to all investors, debt plus equity minus cash) as a multiple of a financial metric. EV/Revenue compares value to sales and is used for fast-growing or not-yet-profitable companies; EV/EBITDA compares value to operating cash earnings and is used for profitable ones. A company trading at "10x revenue" has an EV ten times its annual sales.

Why it matters

Multiples are how investors quickly compare what companies are worth relative to peers. Which multiple you use signals the company's stage: revenue multiples for growth, EBITDA multiples for maturity.

Resources

Investopedia, EV/EBITDA

investopedia.com

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