Enterprise value-to-sales compares the enterprise value of a company to its annual sales. The EV/sales multiple gives investors a quantifiable metric of how to value a company based on its sales, while taking account of both the company's equity and debt.

This ratio can be used for spotting recovery situations or for checking that a growth stock has not become overvalued. It comes in handy when a company begins to suffer losses and, as a result, has no earnings with which investors can assess the shares.

Enterprise value-to-sales is an expansion of the price-to-sales valuation, which uses market capitalization instead of enterprise value. It is perceived to be more accurate than P/S because the market capitalization alone does not take a company's debt and cash into account when valuing the company, while enterprise value does.

We don’t recommend using EV ratios for financial companies, especially banks, because the nature of their balance sheet significantly distorts the enterprise value calculated with the standard definition.

Formula

EV2Sales = EV / Sales

Line Item Valuation Functions and Derived Factors 

These ratios combine line-item filing data with stock prices. The price used in the calculation depends on the period of the financials. The latest close price is used for ratios that involve the latest financials, like the most recent quarter or the latest trailing twelve fiscal months (TTM). For ratios that involve older financials, like the quarter one quarter ago, or the TTM one year ago, the price used for the calculation is the closing price from the first trading day following the period statement's announcement date.

Quarterly values from Income & Cashflow statements are annualized to make the resulting factor more readily comparable with 12-month factors. The annualization is done by multiplying the quarterly figures by approximately 4 (depends on the actual number of days in the period).

You can either use a prebuilt ratio or use the function to define your own.

Function

RatioName(offset,type)
offset: 0-24 (for interim) 0-19 (for annual)
type: QTR (for interim), ANN (for annual), TTM (for trailing twelve months)

For example to screen for stocks whose P/E today is less than their P/E from their previous fiscal 4 quarters enter:

PEExclXor(0,TTM) < PEExclXor(4,TTM)

The above can also be done using prebuilt ratios:

PEExclXorTTM < PEExclXorPTM

Prebuilt Ratios

Below are the available pre-built ratios with the corresponding parameters for the formula. Please note that availability varies by factor.

* AD+1: uses the closing price from the first trading day following the period statement's announcement date. For TTM, the AD is that of the latest quarter which is included in the TTM.

** PTM uses interim periods, so the offset is 4, not 1.

Click here for the Line-Item Reference Spreadsheet.