Price To Sales Ratio Calculator

Understanding the Price to Sales (P/S) Ratio

The Price to Sales (P/S) ratio compares a company's total market value (market cap) to its total revenue or sales over the trailing 12 months. It is particularly useful for valuing unprofitable startups, high-growth tech companies, or turnarounds where traditional earnings-based metrics like P/E are unavailable.

Formula for Price to Sales Ratio

Calculate P/S using per-share figures:

$$\text{P/S Ratio} = \frac{\text{Share Price}}{\text{Revenue Per Share (SPS)}}$$

Or using overall company figures:

$$\text{P/S Ratio} = \frac{\text{Market Capitalization}}{\text{Total Revenue}}$$

Key Advantages of the P/S Ratio

• Works for Unprofitable Firms: Companies with negative net earnings still generate gross revenues, allowing P/S valuation when P/E fails.
• Sales Are Hard to Distort: Revenue numbers are generally less susceptible to accounting choices than net income figures.
• Cyclical Comparison: Helps compare early-stage growth companies against established industry peers.

Related Financial Calculators

• Price to Earnings Calculator
• Price to Book Ratio Calculator
• Revenue Growth Calculator