EV/Revenue Multiple

A valuation ratio comparing a company's enterprise value to its EBITDA. EV/EBITDA is one of the most commonly used multiples for comparing valuations across companies, controlling for differences in capital structure, taxation, and depreciation policies.

A valuation multiple calculated by dividing enterprise value by revenue, used to value businesses where profitability is not yet meaningful — such as early-stage companies, high-growth SaaS businesses, and pre-profit biotech firms. EV/Revenue is less susceptible to manipulation through accounting choices than earnings-based multiples but provides less insight into operating efficiency.

A valuation methodology that estimates a company's value by comparing it to similar publicly traded companies using financial ratios such as EV/Revenue or EV/EBITDA. Comps provide a market-based reference point but may undervalue intangible-heavy businesses if peers are not well matched.

A valuation ratio comparing a company's market capitalisation to its book value. A P/B ratio significantly above 1.0 indicates that the market recognises substantial value beyond what is recorded on the balance sheet, typically reflecting intangible assets.

A ratio measuring the efficiency with which a company uses its assets to generate revenue, calculated as revenue divided by total assets. A higher asset turnover indicates more productive use of the firm's asset base.

The degree to which a company's operating income changes relative to a change in revenue, determined by the proportion of fixed costs to variable costs. Companies with high intangible asset bases often exhibit strong operating leverage because intangible costs (such as software development and R&D) are largely fixed, enabling profits to scale rapidly with revenue.

A performance benchmark for SaaS and subscription businesses stating that the sum of revenue growth rate and profit margin should equal or exceed 40%. The Rule of 40 balances growth and profitability and is widely used by investors to assess whether a company is creating sustainable enterprise value.

The ability of a business to grow revenue significantly without a proportional increase in costs or resources. Highly scalable businesses—often those built on software, platforms, or strong intangible assets—can expand margin as they grow, making them attractive to investors.

The AI Valuation Premium: How AI Capability Affects Company Value

AI-enabled companies trade at 25-40% higher multiples than peers, but not all AI capability is created equal. This article examines what drives the AI valuation premium, how to assess whether it is justified, and what happens when the premium unravels.

How do intangible assets interact with valuation multiples?

Companies with strong intangible assets (brands, IP, data moats) tend to command higher valuation multiples than commodity businesses, because buyers pay more for durable, defensible earnings.

How do intangible assets affect company valuation multiples?

Companies with strong intangible assets command higher EV/Revenue and EV/EBITDA multiples because intangibles drive sustainable margins, competitive moats, and scalable growth.

What is a multiple (EV/Revenue, EV/EBITDA) and how do I choose the right one?

Multiples are shortcuts: Enterprise Value / Revenue (EV/Revenue) for growth-stage, EV/EBITDA for profitable companies, EV/Users for early-stage. Choose based on whether your business is profitable.