Price to sales (P/S)

Also called: price to sales, p/s

What investors pay for each 1 of yearly revenue. Useful for companies that aren't profitable yet.

Formula

P/S = Market cap ÷ Revenue

Worked example

1. Market cap = $40.0bn
2. Revenue = $10.0bn
3. P/S = $40.0bn ÷ $10.0bn

Result: 4.0×

How to read it

Compare with similar companies. A high P/S needs strong growth or high future margins to justify it.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)