EV/Revenue
Useful for companies that aren't yet profitable. Common for SaaS and biotech. Always check gross margins alongside this \u2014 high EV/Revenue with low margins is a red flag.
Formula
(Market Cap + Debt - Cash) / Revenue = ({marketCap} + {debt} - {cash}) / {revenue}
Why it matters
Revenue is the one financial metric that's almost always positive, making this ratio useful for pre-profit companies. It's the standard valuation metric for high-growth SaaS, biotech, and early-stage companies.
How to read it
Highly sector-dependent. SaaS companies with 80%+ gross margins trade at 5-15x revenue. Hardware companies with 30% margins rarely justify above 2-3x. Always consider the gross margin — a high EV/Revenue with low margins is a red flag.
Related terms
Ambiguity Aversion · Anchored Assumption · Asset Beta · Bank ROE Spread · Banker Pitch Deck · Beta
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