Price-to-Sales Ratio Calculator

Calculate the price-to-sales ratio

The price-to-sales ratio, or P/S, values a company by comparing its market capitalisation to its annual revenue. It is calculated by dividing market cap by revenue, or equivalently by dividing the share price by sales per share. A P/S of two and a half means investors are paying two and a half dollars for every dollar of the company's annual sales. Because it uses revenue rather than profit, the P/S ratio can be applied to companies that are not yet profitable, where the price-to-earnings ratio is meaningless.

This makes it especially popular for valuing young, fast-growing companies.

When to use P/S

The price-to-sales ratio shines when earnings are negative, volatile or distorted by one-off items, since revenue is harder to manipulate and more stable than profit. Investors use it to compare companies within a sector and to spot potential bargains or overvaluation. A low P/S can indicate an undervalued company, though it may also reflect thin margins.

The ratio's main weakness is that it ignores profitability entirely: two companies with the same P/S can have very different margins, so high revenue at a loss is not the same as high revenue at a profit. Use it alongside margin and earnings measures, and compare within an industry. All calculation happens locally in your browser.

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