top of page

What is the Price to Sales Ratio?

Updated: Apr 9, 2023

Price/sales (P/S) is a valuation ratio used in financial analysis to compare a company's stock price to its revenue per share. It is calculated by dividing a company's current market capitalization (the current share price multiplied by the number of outstanding shares) by its total revenue over the past 12 months.

The P/S ratio is often used as an alternative to the price-to-earnings (P/E) ratio, especially for companies that are not profitable or have inconsistent earnings. The P/S ratio measures the market's valuation of a company relative to its revenue rather than its earnings.

Generally, a lower P/S ratio may indicate that a company is undervalued, while a higher P/S ratio may indicate that the company is overvalued. However, it is important to compare the P/S ratio of a company to its peers in the same industry to gain a better understanding of its valuation.

Like any financial ratio, the P/S ratio should be used in conjunction with other analysis methods and should not be the sole determinant of an investment decision.

14 views0 comments

Recent Posts

See All

What are the best Momentum Indicators?

Advanced traders use various momentum indicators to identify potential trend changes, gauge the strength of a trend, and generate trading signals. Some of the best momentum indicators include: 1. Rela


bottom of page