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.
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See price-sales ratio.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.