What is a good price-to-sales ratio?

It depends on profit margins and growth. A low P/S is cheaper per dollar of sales, but check margins so you know how much of each sales dollar turns into profit.

Is a higher or lower P/S better?

When Stock Meadow ranks stocks, a lower figure scores better. That is a ranking convention, so read P/S alongside other measures and compare similar companies.

Why is P/S blank for some stocks?

It is usually blank when revenue figures aren't available. Stock Meadow leaves the figure blank rather than guessing it.

Stock Meadow · Metric glossary · Valuation

Price-to-Sales Ratio (P/S): formula and how to read it

The price-to-sales ratio compares what the market pays for a company with its revenue. It is useful when profits are small, volatile or negative.

What is Price-to-Sales Ratio (P/S)?

What you pay for each dollar of sales. Market capitalization divided by positive trailing twelve-month revenue.

Stock Meadow groups it under Valuation, and shows it in tables as P/S.

Formula and a worked example

P/S = market capitalization ÷ revenue over the trailing twelve months

A company valued at $600 million with $300 million of revenue has a P/S of 2.0. The numbers are made up for illustration.

How to read it

A lower P/S means you pay less for each dollar of sales. Sales say nothing about profitability, so the same P/S can be cheap for a high-margin business and expensive for a thin-margin one.

When Stock Meadow ranks stocks, a lower figure scores better.

Common pitfalls

Revenue is not profit. A low P/S on a company that never makes money is not a bargain.
Industries have very different margins, so compare a stock with its own sector.
It only uses positive revenue, so it is blank when revenue is not reported.

How Stock Meadow handles gaps. Usually blank when revenue figures aren't available.

Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.

Stock Meadow models that use it

Fixed-recipe models that score it: Trending Value (O'Shaughnessy).

In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.

Read about every scoring model on the scoring models page.

Frequently asked questions

What is a good price-to-sales ratio?: It depends on profit margins and growth. A low P/S is cheaper per dollar of sales, but check margins so you know how much of each sales dollar turns into profit.
Is a higher or lower P/S better?: When Stock Meadow ranks stocks, a lower figure scores better. That is a ranking convention, so read P/S alongside other measures and compare similar companies.
Why is P/S blank for some stocks?: It is usually blank when revenue figures aren't available. Stock Meadow leaves the figure blank rather than guessing it.

Use P/S in Stock Meadow

Filter on Price / sales (TTM), score it in your own screen, and see how every stock compares. Free during the preview.

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