Price to Sales Ratio PS Definition & Meaning | Fundamental Analysis | CSIMarket
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Glossary

Price to Sales Ratio PS

Fundamental Analysis

Price to Sales Ratio (PS) is a valuation ratio that compares a company*s stock price to its revenue per share. It is a financial metric that is used by investors to determine how much revenue a company generates relative to its stock price. The PS ratio is especially useful for companies that are not yet profitable but are growing quickly. It is one of the many financial ratios used for fundamental analysis to assess the investment quality of a company.

The formula for calculating PS is as follows:

Price to Sales Ratio (PS) = Market Capitalization / Total Revenue

Market Capitalization is the total value of the company*s outstanding shares, calculated by multiplying its share*s current market price by the total number of outstanding shares.

Total Revenue is the sum of all the revenue generated by a company over a specific period, usually one year.

The PS ratio is useful because it can provide insight into how much revenue a company generates per dollar invested. A low PS ratio may indicate an undervalued stock, while a high PS ratio may indicate an overvalued stock. This ratio can also be compared to industry peers to determine if a company is relatively cheap or expensive compared to its competitors. However, it is important to note that the PS ratio should not be used in isolation as it is just one of many factors to consider when evaluating a stock*s investment potential.




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