Price to Sales Ratio Calculator [2025]

What is the P/S Ratio?

The Price to Sales (P/S) ratio is a valuation metric that compares a company's market capitalization to its total revenue over a specific period (usually the last 12 months). It indicates how much investors are willing to pay for each dollar of a company's sales.

How to Interpret the P/S Ratio

• High P/S Ratio: May suggest that the stock is overvalued relative to its sales. Investors are paying a premium for each dollar of sales.
• Low P/S Ratio: May suggest that the stock is undervalued relative to its sales. Investors are paying less for each dollar of sales.
• Comparison to Industry Average: Comparing a company's P/S ratio to the average P/S ratio of its industry can provide insights into its relative valuation.

Limitations of the P/S Ratio

• Doesn't Consider Profitability: The P/S ratio doesn't take into account a company's expenses or profits. A company with high sales but low profits might have a low P/S ratio but still not be a good investment.
• Industry-Specific: P/S ratios vary significantly across industries. It's most useful when comparing companies within the same industry.
• Doesn't Account for Debt: The P/S ratio doesn't consider a company's debt levels, which can impact its overall financial health.