EV/S = Enterprise Value/Sales EV = Market Value + Net Indebtedness Sales = Turnover
Unlike P/S, EV/S also takes the Net Debt into account.
Two companies with the same P/S may have different net debts; this would be evident through the use of EV/S.
In general, EV/S is between 1 and 3.
Things to keep in mind
- A low value is good.
- Any value less than 1 is considered a low ratio. Anything over 3 is considered a high ratio.