P/S ratio

How many times sales the whole company is priced at

In detail

The price-to-sales ratio divides market capitalisation by annual sales. It is used for companies that are still growing into profit, where a P/E cannot be calculated. But a company with large sales and continuing losses is valued unsteadily, so a low number is not automatically cheap. Compare within a sector and a growth stage.

Example

A market cap of $500 million on sales of $100 million is a P/S of 5.

Related terms

P/E ratio Market capitalization Revenue

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