Trading at "X" Times Revenue

Have you heard someone say, “that company is trading at 5 times revenue”?

When someone says that a company is trading at X times revenue, X typically equals the market cap of the company divided by the current quarter’s revenue multiplied by 4. (In some cases the denominator is the aggregate of the company’s last 4 quarters of revenue).

Let’s put this into practice. Let’s look at Salesforce. Go to google.com/finance and type in “CRM” in the search bar. You’ll then see the below. First, go to “Mkt Cap”:

Then go to “financials” and you’ll see the below. And then find “Revenue”:

Here, Salesforce is trading at around 8 times revenue. That is 147.39 / (4.51 *4).

Having this number is useful. It’s one (of many) factors that can help assess how expensive or cheap other companies similar to Salesforce are.