What is the EV/revenue multiple?
The EV/revenue multiple is enterprise value divided by revenue. It expresses what the market is willing to pay for each dollar of a company's revenue.
It is the default valuation lens for high-growth software. Because many SaaS companies are not yet profitable, an earnings multiple cannot be calculated, so revenue multiples carry the weight instead.
The formula.
EV/revenue multiple = enterprise value divided by revenue. This tool calculates the multiple from those two figures, and a second mode runs it backward, applying a multiple to revenue to estimate enterprise value.
Using enterprise value rather than market cap in the numerator matters, since it normalizes for debt and cash. That makes the multiple comparable across companies with different balance sheets.
A worked example.
A company has a 50,000,000 enterprise value on 10,000,000 of revenue. The EV/revenue multiple is 50,000,000 divided by 10,000,000, which is 5x.
What is a good EV/revenue multiple?
There is no fixed answer, because the multiple is driven mostly by growth rate and the prevailing market. A company growing 100% a year commands a far higher multiple than one growing 20%, and the whole market reprices over time.
The multiple rests on the revenue underneath it and how fast that revenue is growing. Reading it next to the growth that sets the multiple connects the valuation to the performance behind it.
How to estimate value with it.
Take a multiple from comparable companies at a similar growth rate and apply it to your revenue using the implied-EV mode. The result is a defensible, if rough, enterprise value, only as good as the comparables you choose.
What lifts the multiple over time is efficient growth, the kind buyers pay a premium for. That is the case for building growth efficiency the market pays for.