Revenue Multiples
Also called EV/Revenue · Revenue Multiple · Sales Multiple
Revenue multiples are Purchase Price / Revenue multiples. So if a business was bought for $100 and had $10 of Revenue, they would have a Revenue multiple of 10.0x
Revenue multiples are most commonly used with high-growth businesses such as software businesses that have not stabilized their profitability yet.
Why Revenue Multiples matters in investment banking interviews
Knowing when to use revenue multiples instead of EBITDA multiples is the real test. High-growth software companies often aren't profitable yet, so EBITDA is meaningless or negative — that's when the market defaults to revenue.