Price to Sales Calculator
Calculate the Price-to-Sales (P/S) ratio to evaluate company valuation
Calculate P/S Ratio
Calculate using total market capitalization and revenue
Total market value of company's outstanding shares
Company's total annual revenue or sales
For calculating per-share metrics
Valuation Results
📊 Interpretation
The P/S ratio is moderate. Investors are willing to pay more for each dollar of revenue.
Company Metrics
Calculation Formula
P/S Ratio =
Market Capitalization ÷ Total Revenue
= $5.00M ÷ $2.00M
= 2.50
💡 Investment Insights
Example Calculation
Tech Company Example
Market Capitalization: $5,000,000
Annual Revenue: $2,000,000
Outstanding Shares: 100,000
Calculation
P/S Ratio = Market Cap ÷ Revenue
P/S Ratio = $5,000,000 ÷ $2,000,000
P/S Ratio = 2.50
Share Price = $5M ÷ 100K = $50/share
Revenue/Share = $2M ÷ 100K = $20/share
Alternative: $50 ÷ $20 = 2.50 ✓
Interpretation
A P/S ratio of 2.50 means investors are paying $2.50 for every $1 of revenue. This is moderate and suggests the company is reasonably valued, especially if profit margins are good.
P/S Ratio Benchmarks
* Benchmarks vary by industry. Tech companies often have higher P/S ratios.
Typical P/S by Industry
Approximate ranges. Always compare within the same industry.
Analysis Tips
Compare P/S ratios within the same industry
Lower P/S ratios may indicate better value
Consider profit margins alongside P/S ratio
High-growth companies often have higher P/S ratios
Use P/S with other metrics like P/E and P/B
Useful for unprofitable companies with revenue
Understanding Price-to-Sales (P/S) Ratio
What is the P/S Ratio?
The Price-to-Sales (P/S) ratio is a valuation metric that compares a company's stock price or market capitalization to its revenue. It shows how much investors are willing to pay for each dollar of the company's sales.
Why Use P/S Ratio?
- •Works for unprofitable companies (unlike P/E ratio)
- •Revenue is harder to manipulate than earnings
- •Useful for comparing companies in the same industry
- •Helps identify potentially undervalued stocks
P/S Ratio Formulas
Method 1:
P/S = Market Cap ÷ Total Revenue
Method 2:
P/S = Share Price ÷ Revenue per Share
Key Components
- Market Cap: Total value of all outstanding shares
- Revenue: Total sales (usually annual)
- Share Price: Current trading price per share
- Revenue per Share: Total revenue ÷ shares outstanding
💡 Pro Tip: A lower P/S ratio generally indicates better value, but always compare within the same industry and consider growth prospects.
Advantages and Limitations
✅ Advantages
- • Works for companies without profits
- • Less prone to accounting manipulation
- • Easy to calculate and understand
- • Good for comparing similar companies
- • Useful for fast-growing startups
⚠️ Limitations
- • Doesn't account for profitability
- • Ignores debt levels and costs
- • Varies significantly by industry
- • Doesn't reflect cash flow
- • Can miss quality of revenue
When to Use P/S Ratio
Best For:
- • Unprofitable companies
- • Fast-growing startups
- • Tech companies
- • Early-stage businesses
Use With Caution:
- • Across different industries
- • For capital-intensive businesses
- • With varying profit margins
- • Without other metrics
Combine With:
- • P/E Ratio
- • Profit Margins
- • Growth Rates
- • Cash Flow Analysis
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