Investing term
What is P/S ratio (price-to-sales)?
Market cap ÷ revenue. What you're paying per dollar of sales the company brings in.
The price-to-sales ratio (P/S) compares a company's market value to its revenue — useful for valuing fast-growing firms that don't yet have profits to anchor a P/E. Because it ignores costs, a low P/S doesn't guarantee a bargain (the company might never turn a profit), but it offers a rough sense of how much the market is paying per dollar of sales.
For example
A young company with no earnings trades at 5× sales — a P/S ratio that lets you gauge its valuation when a P/E simply doesn't exist yet.
P/S ratio (price-to-sales) is taught hands-on in Stage 15 — Valuation for Investors.
See the lesson →