1. What is EV to Sales Calculator?

Definition: This calculator computes the EV to sales ratio, a valuation metric comparing enterprise value to sales.

Purpose: Helps investors evaluate a company’s value relative to its revenue, useful for comparing firms across industries.

2. How Does the Calculator Work?

The calculator uses the following steps:

Step 1: Calculate Enterprise Value

Where:

• \( \text{mkt_cap} \): Market Capitalization (dollars)
• \( \text{tot_debt} \): Total Debt (dollars)
• \( \text{cash_eq} \): Cash and Cash Equivalents (dollars)
• \( \text{pref_shares} \): Preferred Shares (dollars)
• \( \text{minor_int} \): Minority Interest (dollars)

Step 2: Calculate EV to Sales

Where:

• \( \text{Sales} \): Annual Sales (dollars)

Steps:

• Enter market cap, total debt, cash equivalents, preferred shares, minority interest, and sales.
• Calculate enterprise value.
• Divide by sales to get the EV to sales ratio.
• Display with 2 decimal places.

3. Importance of EV to Sales

Calculating EV to sales is crucial for:

• Valuation: Assesses value relative to revenue, ignoring debt structure.
• Industry Comparison: Allows comparison across companies with different capital structures.
• Investment Insight: Lower ratios may indicate undervaluation, higher ratios overvaluation.

4. Using the Calculator

Example 1: mkt_cap = $400,000, tot_debt = $20,000, cash_eq = $10,000, pref_shares = $5,000, minor_int = $0, Sales = $300,000:

• EV: \( 400,000 + 20,000 - 10,000 + 5,000 + 0 = 415,000 \) dollars
• EV to Sales: \( \frac{415,000}{300,000} \approx 1.38 \)
• Result: EV = 415,000 dollars, EV to Sales = 1.38

Example 2: mkt_cap = $600,000, tot_debt = $50,000, cash_eq = $20,000, pref_shares = $0, minor_int = $10,000, Sales = $500,000:

• EV: \( 600,000 + 50,000 - 20,000 + 0 + 10,000 = 640,000 \) dollars
• EV to Sales: \( \frac{640,000}{500,000} = 1.28 \)
• Result: EV = 640,000 dollars, EV to Sales = 1.28

5. Frequently Asked Questions (FAQ)

Q: What is a good EV to sales ratio?
A: Depends on industry; typically 1-2 is average, below 1 may indicate undervaluation.

Q: Why use trailing twelve months' sales?
A: It provides a full-year revenue view, avoiding seasonal distortions.

Q: Where to find these values?
A: Market cap from stock screeners, debt and sales from balance sheet/income statement.

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