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Enterprise Value to Revenue Multiple

A company’s enterprise value divided by its total annual revenue

Written by

CFI Team

Published January 18, 2023

Updated July 7, 2023

What is the Enterprise Value to Revenue Multiple?

The Enterprise Value to Revenue Multiple is a valuation metric used to value a business by dividing its enterprise value (equity plus debt minus cash) by its annual revenue. The EV to revenue multiple is commonly used for early-stage or high-growth businesses that don’t have positive earnings yet.

Why Use the EV to Revenue Multiple?

If a company doesn’t have positive Earnings Before Interest Taxes Depreciation & Amortization (EBITDA) or positive Net Income, it’s not possible to use EV/EBITDA or P/E ratios to value the business. In this case, a financial analyst will have to move further up the income statement to either gross profit or all the way up to revenue.

If EBITDA is negative, then having a negative EV/EBITDA multiple is not useful. Similarly, a company with a barely positive EBITDA (almost zero) will result in a massive multiple, which isn’t very useful either.

For these reasons, early-stage companies (often operating at a loss) and high growth companies (often operating at breakeven) require an EV/Revenue multiple for valuation.

EV to Revenue Multiple Formula

The formula for calculating the multiple is:

= EV / Revenue


EV (Enterprise Value) = Equity Value + All Debt + Preferred Shares – Cash and Equivalents

Revenue = Total Annual Revenue

Sample Calculation

Here is an example of how to calculate the EV to Revenue multiple:

Suppose a company has a current share price of $25.00, shares outstanding of 10 million, a debt of $25 million, cash of $50 million, no preferred shares, no minority interest, and a 2023 revenue of $100 million. What is its EV/Revenue ratio?


$25 times 10 million shares is a market capitalization of $250 million.

Add $25 million of debt and deduct $50 million of cash to get an Enterprise Value (EV) of $225 million.

$225 million divided by $100 million of revenue is 2.25x EV/Revenue


Below is a screenshot of the calculation in Excel:

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EV/Revenue Calculator

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Why is EV Used in the Numerator Instead of Price (or Market Cap)?

EV is used instead of the price or market cap in the numerator to remove any impact of valuation caused by a company’s capital structure. This will allow the comparison of values between similar-type companies with different capital structures (debt vs. equity mix).

What are the Pros and Cons of the EV to Revenue Multiple? Pros:

Useful for companies with negative earnings

Useful for businesses with negative or near zero EBITDA

Easy to find revenue figures for most businesses

Easy to calculate the ratio


Does not take into account the company’s capital structure

Ignores profitability and cash flow generation

Hard to compare across different industries and different growth stages of companies (early vs. mature)

Case Study

The second example is in CFI’s e-Commerce Financial Modeling course, where students will build a model from scratch to value a business, which includes determining the company’s EV/Revenue ratios across various years.

Additional Resources

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