Metrics & Performance
Price-to-Sales Ratio
A valuation metric comparing a company's market value to its revenue, commonly used to evaluate SaaS company valuations.
Price-to-sales (P/S) ratio divides enterprise value or market cap by annual revenue. For SaaS companies, this typically ranges from 5-25x revenue depending on growth rate, margins, and market conditions. Higher-growth companies command higher multiples.
In Practice
A SaaS company at $50M ARR growing 100% YoY was valued at 25x revenue ($1.25B). A slower-growing competitor at the same revenue but 40% growth traded at 10x ($500M).
Why It Matters
P/S ratios provide a quick way to compare valuations across companies and detect over/under-valuation relative to growth and profitability.
VC Beast Take
Price-to-sales is the lazy shortcut that works surprisingly well. When someone says a company is 'expensive,' they usually mean the P/S ratio is high relative to growth.
Related Concepts
Newsletter
The VC Beast Brief
Join thousands of founders and investors. Every Tuesday.
VentureKit
Ready to launch your fund?