EV/Gross profit
Like EV/Sales, but against the profit left after the direct cost of what was sold. Fairer when margins differ a lot.
Worked example · a round-number company
EV$11.0B÷Gross profit$3.5B=EV/Gross profit3.1xHow to read it
↓Lower is better. A lower multiple pays less for the same gross profit.
Keep in mind
- Gross profit is before research, marketing and overhead, so it is still far from what owners keep.