Enterprise-Value-To-Revenue Multiple - EV/R

Enterprise value represents the amount it would take to buy out a company. It includes the value of the firm's outstanding equity (also known as market capitalization), as well as its outstanding debt.

The revenue part is pretty obvious, but we'll give the definition for the sake of completeness: it's the money a company collects for selling its goods and services.

The enterprise-value-to-revenue multiple gives the ratio between the two. The EV/R indicates how well the market has priced a company’s stock. The enterprise value acts as an indicator of the company’s market price (including as it does the firm’s share price). And revenue acts as a (relatively simple) proxy for the company's financials.

EV/R doesn't mean much in a vacuum. But an investor can compare the figures for two similar companies and see which one represents a better value. Basically, they can see which stock allows them to "buy" more revenue with the same amount of money.

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