EV/NTM is a forward-looking valuation metric that compares a company’s Enterprise Value to its projected financial results—typically revenue or EBITDA—for the Next Twelve Months. For SaaS companies, where growth often outpaces profitability, this multiple has become the standard benchmark investors use to assess relative value.
This guide covers how to calculate EV/NTM, when to use revenue versus EBITDA variations, what drives higher or lower multiples, and how finance teams can build credible NTM forecasts for board reporting and fundraising.
What is EV/NTM
What is EV/NTM and why does it matter for SaaS valuation?
EV/NTM is a forward-looking valuation metric that compares a company’s Enterprise Value (EV) to its projected financial results for the Next Twelve Months (NTM). Investors and analysts use EV/NTM to assess how the market values a company relative to expected future performance rather than historical results.
The metric has two components:
- Enterprise Value (EV): The total value of a company, calculated as market capitalization plus total debt minus cash and cash equivalents
- Next Twelve Months (NTM): The forecasted 12-month period starting from the current date, not a fixed calendar or fiscal year
For high-growth SaaS companies, many of which operate at a loss while scaling, EV/NTM Revenue has become the standard valuation benchmark. Revenue-based multiples remain meaningful even when earnings are negative, which is why investors rely on EV/NTM when evaluating pre-profit software businesses.
How to calculate EV/NTM revenue
How do you calculate EV/NTM revenue for a SaaS company?
The formula is straightforward:
EV/NTM Revenue = Enterprise Value ÷ NTM Revenue
The result is expressed as a multiple. A company trading at “10x NTM revenue” means investors are paying $10 for every $1 of expected revenue over the next twelve months.
1) Determine enterprise value
Start by calculating Enterprise Value:
Enterprise Value = Market Capitalization + Total Debt – Cash
For a public SaaS company with a $500M market cap, $50M in debt, and $30M in cash, the Enterprise Value would be $520M. Private companies typically derive EV from their most recent funding round or secondary transaction, where the post-money valuation serves as a proxy.
2) Forecast next twelve months revenue
NTM revenue is a rolling forward projection. For public companies, analysts use consensus estimates compiled from Wall Street research.
For SaaS businesses, NTM revenue often starts with current ARR as a baseline. Finance teams then layer in expected expansion from upsells and cross-sells, subtract anticipated churn based on historical retention rates, and add projected new customer revenue.
3) Divide enterprise value by NTM revenue
Using the example above, if the company’s NTM revenue forecast is $65M:
- EV/NTM Revenue = $520M ÷ $65M
- EV/NTM Revenue = 8.0x
This means the company trades at 8 times its expected next-twelve-months revenue. Higher multiples generally indicate that investors expect stronger future growth or see lower risk in the business.
EV/NTM revenue vs EV/NTM EBITDA
What is the difference between EV/NTM revenue and EV/NTM EBITDA?
EV/NTM Revenue and EV/NTM EBITDA are the two most common variations of the EV/NTM multiple, and each serves a different purpose.
| Metric | Best For | Why |
|---|---|---|
| EV/NTM Revenue | High-growth, pre-profit SaaS | Revenue is meaningful when earnings are negative |
| EV/NTM EBITDA | Mature, profitable companies | Captures operating efficiency and cash flow potential |
EV/NTM Revenue works well for growth-stage SaaS companies that prioritize scaling over profitability. Since many of these businesses have negative EBITDA, a revenue-based multiple provides a more useful comparison.
EV/NTM EBITDA, on the other hand, is heavily used in M&A transactions. Acquirers often price targets based on projected profitability, making this multiple essential for deal negotiations involving mature software companies.
EV/NTM vs Other Saas Valuation Multiples
How does EV/NTM compare to other valuation multiples used for SaaS?
EV/NTM sits within a broader landscape of valuation approaches. Understanding when to use each helps finance teams and investors select the right benchmark for a given situation.
EV/NTM vs EV/LTM
LTM stands for Last Twelve Months, a trailing, historical measure. EV/NTM looks forward while EV/LTM looks backward.
For fast-growing companies, past performance often understates future potential. A SaaS business growing 50% year-over-year would appear overvalued on an LTM basis but reasonably priced on an NTM basis. Growth investors typically prefer forward multiples for this reason.
EV/NTM vs EV/ARR
ARR (Annual Recurring Revenue) represents annualized recurring revenue at a specific point in time, while NTM revenue is a forecast that may include non-recurring revenue streams.
EV/ARR is commonly used for private SaaS valuations where analyst forecasts don’t exist. Public market investors typically use EV/NTM Revenue because consensus estimates are readily available.
EV/NTM vs Price to Earnings
The P/E ratio divides stock price by earnings per share. For unprofitable SaaS companies, P/E is not meaningful because you can’t calculate a multiple when earnings are negative.
EV/NTM Revenue works regardless of profitability, which is why it has become the standard for growth-stage software businesses.
Why EV/NTM is the Preferred Multiple For Saas Valuation
Why do investors prefer EV/NTM for valuing SaaS companies?
Several characteristics make EV/NTM particularly well-suited for recurring revenue businesses:
- Forward-looking: Captures expected growth trajectory rather than just historical performance
- Capital structure neutral: Enterprise value accounts for debt and cash, enabling apples-to-apples comparison across companies with different balance sheets
- Works for pre-profit companies: Revenue-based multiples remain meaningful when EBITDA or net income is negative
- Standardized benchmark: Allows comparison across public SaaS companies with different accounting treatments or fiscal year-ends
Key Drivers of the EV/NTM Multiple
What factors influence a company’s EV/NTM multiple?
Not all SaaS companies trade at the same multiple. The following are the primary drivers investors evaluate when determining what premium or discount a company deserves.
Revenue growth rate
Faster-growing companies command higher multiples. Growth is the single most important driver of SaaS valuations, and investors consistently pay premiums for businesses that can sustain high growth rates over time.
Rule of 40 score
The Rule of 40 adds revenue growth rate to profit margin. Companies exceeding this threshold, where growth plus margin equals 40% or higher, typically earn premium multiples because they demonstrate both scale and efficiency.
Gross margin
Higher gross margins indicate scalable unit economics. SaaS companies with gross margins above 75% trade at higher multiples than those with lower margins, all else being equal.
Net revenue retention
NRR measures revenue retained from existing customers, including expansion. High NRR signals product stickiness and successful land-and-expand motions. Companies with NRR above 120% often command significant valuation premiums.
Quality and predictability of ARR
Recurring, contracted revenue is valued more highly than one-time or variable revenue. Investors pay premiums for revenue predictability, which is why companies with strong ARR foundations typically trade at higher multiples.
EV/NTM Benchmarks for Public Saas Companies
What is a good EV/NTM multiple for a SaaS company?
Benchmarks vary significantly based on growth rate, profitability, and market conditions. However, some general patterns hold:
- High-growth SaaS (>30% growth): Often trades at higher multiples, sometimes exceeding 10x NTM revenue
- Moderate-growth SaaS (15-30% growth): Typically trades in the mid-single digits
- Mature SaaS (<15% growth): Often trades at lower multiples as growth decelerates
Multiples compress and expand with macroeconomic conditions. Rising interest rates, for example, tend to compress SaaS multiples because future cash flows become less valuable in present terms. Current public SaaS indices provide the most up-to-date benchmarks.
How Investors and Boards Use EV/NTM
Fundraising and term sheet negotiations
Private companies use public EV/NTM comps to justify valuation asks during fundraising. Investors typically apply discounts for illiquidity and scale when setting pre-money valuations, but public comparables provide the starting point for negotiations.
Public market comparables analysis
Investment bankers and analysts build comp tables using EV/NTM to value IPO candidates and assess relative valuation among peers. A company trading below its peer group average might be considered undervalued, or it might have fundamental issues worth investigating.
M&A and corporate development
Acquirers use EV/NTM, often EV/NTM EBITDA for profitable targets, to price acquisitions and assess deal premiums relative to trading multiples.
Internal board reporting
CFOs track implied EV/NTM based on internal forecasts to monitor value creation and prepare for future capital events. This helps boards understand how operational improvements translate to enterprise value.
Best Practices for Forecasting NTM Revenue
1) Anchor NTM to contracted ARR
Start with current ARR as the baseline. Contracted revenue provides the most defensible foundation for forward projections because it represents committed customer spend.
2) Layer in expansion and renewal assumptions
Add expected upsells, cross-sells, and price increases. Subtract anticipated churn based on historical retention rates. Each assumption benefits from supporting data.
3) Segment revenue by product and GTM motion
Break down forecasts by product line, customer segment, and go-to-market channel. Granular forecasts are more credible to investors because they demonstrate operational understanding.
4) Reconcile ARR to GAAP revenue
Ensure the NTM revenue forecast ties to recognized revenue under ASC 606. Explain any differences between ARR and GAAP revenue to avoid confusion during due diligence. Integrated billing and revenue recognition systems help maintain this consistency automatically.
Common Mistakes when Using EV/NTM
Mixing ARR and GAAP revenue definitions
Using ARR in the denominator when comparable companies use GAAP revenue creates misleading comparisons. Staying consistent with how peers define and report revenue is important for accurate benchmarking.
Ignoring usage and transaction revenue volatility
Usage-based and transaction revenue can fluctuate significantly quarter to quarter. Investors may discount volatile revenue streams when applying multiples, so forecasts benefit from acknowledging this variability.
Comparing across different growth stages
A high-growth Series B company cannot expect the same multiple as a decelerating public company. Adjusting comps for stage and growth profile makes for more meaningful comparisons.
Using stale enterprise value inputs
Market cap and debt balances change frequently. Using current data when calculating EV avoids outdated multiples that misrepresent the company’s valuation.
Improve EV/NTM reporting with Ordway
Accurate, investor-grade ARR and revenue reporting forms the foundation of credible EV/NTM analysis. Ordway’s SaaS Metrics software helps finance teams build defensible forecasts and communicate valuation drivers clearly.
- Automated ARR tracking: Calculate ARR movements, including new, expansion, contraction, and churn, automatically from contract data
- Flexible revenue recognition: Support ASC 606 compliance for accurate GAAP revenue forecasts
- Segmented reporting: Break down ARR by product, geography, GTM motion, and entity for granular forecasting
- Investor-ready metrics: Generate board and investor reports with consistent, auditable definitions
Frequently Asked Questions
EV/NTM compares a company's Enterprise Value to its projected revenue or EBITDA for the next twelve months. It's a forward-looking metric that shows what investors are willing to pay for each dollar of expected future earnings.
High-growth SaaS companies often operate at a loss while scaling, so revenue-based multiples remain meaningful when earnings are negative. EV/NTM Revenue lets investors evaluate pre-profit software businesses fairly.
EV/NTM Revenue divides enterprise value by projected next-twelve-month revenue, while EV/NTM EBITDA uses projected earnings before interest, taxes, depreciation, and amortization. Revenue multiples work better for unprofitable SaaS companies, while EBITDA multiples suit profitable ones.
Build NTM forecasts by projecting the next twelve months of revenue or EBITDA based on current run rate, pipeline visibility, and historical growth patterns. Use these forecasts in board reporting and fundraising to demonstrate credible forward-looking performance.
