Price-Sales Ratio

Price-sales ratio

Determined by dividing current stock price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.

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price-sales ratio (P/S ratio)

A financial ratio that compares a firm's stock price with its sales per share (or its market value with total revenue). It is used by some analysts to find companies that may be temporarily undervalued in the stock market. A low P/S ratio is thought to characterize a firm with the potential for a significant turnaround because sales are already being made and improvement need only take place in the margin the firm is able to earn on each dollar of sales.

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Price-to-Sales Ratio

The price of a security per share divided by its company's trailing 12-month sales per share. The price-sales ratio is a way to help determine a security's stock valuation, that is, the fair value of a stock in a perfect market. However, it is considered less accurate than the price-earnings ratio because it does not incorporate non-sales related revenues or expenses. As such, it is used in place of the price-earnings ratio only if a company is unprofitable and therefore has no earnings.