Price-to-sales ratio

Price-to-Sales Ratio

A ratio of a company's share price to its revenue from sales over a given period of time, especially a quarter or a year. Fundamentalists and value investors see a low ratio as more positive because it indicates that the company has a great deal of revenue and a fair price, while technicians see a high ratio as more positive because it indicates that share price has increased and will likely continue to increase. In both cases, however, analysts believe the ratio reveals less than other ratios, such as the price-earnings, because price-to-sales does not account for operating expenses in any way.

Price-to-sales ratio.

A price-to-sales ratio, or a stock's market price per share divided by the revenue generated by sales of the company's products and services per share, may sometimes identify companies that are undervalued or overvalued within a particular industry or market sector.

For example, a corporation with sales per share of $28 and a share price of $92 would have a price-to-sales ratio of 3.29, while a different stock with the same sales per share but a share price of $45 would have a ratio of 1.61.

Some financial analysts and money managers suggest that, since sales figures are less easy to manipulate than either earnings or book value, the price-to-sales ratio is a more reliable indicator of how the company is doing and whether you are likely to profit from buying its shares.

Other analysts believe that steady growth in sales over the past several years is a more valuable indicator of a good investment than the current price-to-sales ratio.

References in periodicals archive ?
If it has a cheap price-to-sales ratio or price-to-book ratio, even better.
While Smith focuses on a company's price-to-book ratio, James O'Shaughnessy of O'Shaughnessy Capital Management, Greenwich, Connecticut, says the price-to-sales ratio is the best value indicator.
Instead of focusing on the stock's price-to-earnings ratio, which measures the relative expensiveness of a stock, Hallaren prefers the price-to-sales ratio - market capitalization divided by sales in the prior four quarters.
I used the Price-to-Sales ratio (P/S) to screen for valuation instead of the P/E because while earnings can sometimes be manipulated to appear in a more positive light, sales are hard to tinker with.
Even though TI is going through a significant business model transition at this time and is actually a highly diversified semiconductor company, it still trades at a price-to-sales ratio of 2.
AMKR meets the criteria for this Profit Track as evidenced by its price-to-sales ratio of 0.
The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount.
CPI International meets the criteria for this Profit Track as evidenced by its price-to-sales ratio of 0.
A0x20So let's add a dash of value by looking for stocks with a low price-to-sales ratio.
With a forward PE of under 12, a price-to-sales ratio of 1.
Nasdaq: CPII) meets the criteria for this Profit Track with a price-to-sales ratio of 0.