Thursday, June 19

Price/sales ratio

Price/sales ratio
Price-to-sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the company's revenue in the most recent fiscal year (or the most recent four fiscal quarters); or, equivalently, divide the per-share stock price by the per-share revenue.
The metric can be used to determine the value of a stock relative to its past performance. It may also be used to determine relative valuation of a sector or the market as a whole.
PSRs vary greatly from sector to sector, so they are most useful in comparing similar stocks within a sector or sub-sector. Also, since sales are less easy to manipulate as compared to earnings, price-sales ratios are more indicative of performance as compared to price-earnings ratios.

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