holdings and little or no debt. For these firms, enterprise
value-to-salesratiosarelowerthanprice-to-salesratios.The
median EV/sales ratio for the entire market is 1.58, with
substantial variation across sectors. To illustrate, the top
decileofallU.S.firms hasEV/salesratiosthatexceed 15,
whereasthebottomdecilehasEV/salesratiosthatarelower
than 0.25.
FIGURE 9.3Enterprise Value/Sales Ratios—U.S. Firmsin
January 2006
ANALYSIS OF VALUE MULTIPLES
Tounderstandthedeterminantsofvaluemultiples,wewill
followaprocessverysimilarto theonethatwedevisedto
examineequitymultiples.There,webeganwitha dividend
discountmodelandusedittoderivetheP/E,price-to-book,
andprice-to-salesratios.Inthecaseofvaluemultiples,we