valuation
EV/Revenue (EV/sales) is enterprise value divided by sales. It is the formal ratio behind revenue-based pricing, used to compare firms when margins are not yet comparable or earnings are negative.
EV/Revenue is:
EV/Revenue = enterprise value / revenue (or ARR, if labelled)
It is the clean statement of a revenue multiple with enterprise value locked in the numerator. Equity/sales is generally inferior: cash and leverage then pollute a ratio that was meant to price operations.
The identity every user should keep on the page:
EV/Revenue = EV/EBITDA × EBITDA margin
A 4x sales business at a 20% EBITDA margin is an 20x EV/EBITDA business. If 20x EBITDA would look absurd for that growth and risk, 4x sales is not a bargain—it is the same bet.
Once margins stabilise, EV/Revenue should drop to a cross-check against the earnings multiples.
Kite & Crate is invented, illustration only. GMV €220m; net revenue (take rate) €18m; EV €72m.
| Ratio | Result | Comment |
|---|---|---|
| EV / GMV | 0.33x | Misleading if take rate differs across peers |
| EV / net revenue | 4.0x | The comparable ratio |
| Gross margin on net revenue | 62% | Must match peer set |
| Contribution margin after variable marketing | 18% | The cash the multiple is really buying |
A peer at 6x net revenue with a 30% contribution margin is not a donor multiple for Kite & Crate. Mix GMV and net revenue in one comparable companies table and the screen is fiction.
Growth investors and some strategics still rank processes on EV/Revenue because it is available on day one of a CIM. Credit investors generally will not: they need EBITDA or FCFF. In public markets, EV/sales screens fill up with story stocks; the follow-up is always unit economics and the year FCF appears.
EV/Revenue ignores cost structure, tax and reinvestment. It is easy to abuse in roll-ups where acquired revenue is not organic. In recessions the ratio can look "cheap" while revenue is about to gap down.
Dazur will put EV/Revenue on the first slide of a growth process, then immediately convert it into an implied future EV/EBITDA under an explicit margin path. If that implied earnings multiple cannot be defended, the revenue multiple cannot either. That conversion is the difference between a screen and a thesis.