Price-to-Sales (P/S)
Also called: P/S ratio, price to sales
Market value divided by revenue — a valuation gauge that works even for companies with no earnings yet.
The P/S ratio compares a company's value to its revenue (price ÷ sales per share, or market cap ÷ revenue). Because it uses the top line, it can value early-stage and high-growth companies that have no profits and therefore no meaningful P/E. A lower P/S is cheaper per dollar of sales.
P/S varies hugely by business model — a software company with fat margins commands a far higher P/S than a low-margin retailer — so it's only useful within a sector. It says nothing about whether those sales convert to profit.
On StockSetups
P/S sits among the valuation fields on each StockSetups dossier, useful for sizing up unprofitable growth names that the P/E can't value.
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