Price-to-Sales Ratio

Price-to-Sales Ratio (P/S Ratio): This financial metric compares a company’s market value (stock price) to its total revenue (sales), calculated as:

\[\text{P/S Ratio} = \frac{\text{Market Capitalization}}{\text{Total Revenue (Sales)}}\]

Alternatively, it can be expressed on a per-share basis as:

\[\text{P/S Ratio} = \frac{\text{Market Price per Share}}{\text{Revenue per Share}}\]

• Market Capitalization is the total value of all the company’s shares outstanding.

• Total Revenue is the company’s total sales or income over a specific period.

A lower P/S ratio could suggest that the company is undervalued relative to its sales, while a higher P/S ratio might indicate that investors are willing to pay a premium for the stock due to high growth expectations.