P/S Ratio

P/S ratio

See price-sales ratio.

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P/S Ratio

The ratio of a stock price to the company's annual sales per share. Analysts use the P/S ratio to help determine if a stock is under- or over-valued at a particular time. For example, if a stock in a company has a low P/S ratio, then it indicates that sales are strong but have not been reflected in the stock price. Many analysts believe this means the stock is fundamentally sound and will soon see a jump in price. Likewise, a high P/S ratio indicates that weak sales have not been reflected in the stock price, and that the stock may soon undergo a price correction.