Price-to-Research Ratio

Price-to-Research Ratio

A measure of the relationship between a company's market capitalization and research and development (R&D) expenses.

Notes:

The price-to-research ratio is of greatest importance in research based businesses, such as pharmaceutical companies. It is generally recognized that, in an industry heavily dependent on R&D, a price-to-research ratio is an important indication of a company's ability to generate future profits. However, even if this indication looks favorable, it cannot guarantee the success of future product innovations. A large amount of spending on R&D does not necessarily mean future profits are definite.

See also: Book Value, Market Capitalization, Market Value, P/E Ratio, Price-To-Book Ratio, Research and Development