EV/sales

EV/sales is the most commonly used and the most meaningful of the valuation ratios based on sales. Price/sales is also sometimes used. EV/sales is:

enterprise value ÷sales

As with price/sales, comparisons are only be meaningful with similar companies as margins vary a lot between sectors, and even between companies with different business models in the same sector.

Valuations based on sales rather than profits implicitly assume that a company will be able to return to "normal" margins, or that it will be taken-over by someone who can restore normal margins. Therefore it needs to be treated with caution and investors need to asses the real odds of a return to "business as usual": e.g., achieving the same margins as the peers against whom its EV/sales is being measured. Using EV/sales implicitly assumes that margins are not normal, as otherwise a profit based ratio would be preferable.

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