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Price-to-Sales Ratio Calculator

Find a company's price-to-sales ratio.

How it is calculated

The price-to-sales ratio compares what the stock market values a company at with the revenue it generates: P/S = market capitalisation / revenue. Market capitalisation is share price times shares outstanding. Revenue is usually the trailing twelve months or the last fiscal year; use the same currency for both numbers.

The result is a multiple shown with two decimals: a P/S of 4 means investors pay 4 units for each unit of annual sales. Revenue must be greater than zero and market capitalisation cannot be negative; otherwise there is no result. Because it ignores profit, debt and growth, a P/S is best compared among firms in the same industry and not across sectors. A low ratio is not automatically cheap, and a high ratio may be justified by fast growth.

Worked example

A company has a market capitalisation of 12,000,000,000 and revenue of 3,000,000,000 over the last year. P/S = 12,000,000,000 / 3,000,000,000 = 4. The tool shows a ratio of 4.00, meaning the market values the company at four times its yearly sales.

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Common mistakes

  • Mixing units, such as market cap in billions and revenue in millions, which changes the ratio by a factor of 1,000.
  • Using the share price instead of total market capitalisation, or revenue per share against total market cap.
  • Comparing P/S of companies in different industries, where margins differ widely.
  • Using revenue from an old year for a fast-growing company, which inflates the ratio.

Sources

About this calculator

The price-to-sales ratio (P/S) divides a company's market capitalization by its total revenue over a trailing period (usually the last twelve months), giving a rough measure of how much investors are paying for each dollar of sales. It's calculated as P/S = Market Cap ÷ Revenue, or equivalently share price divided by revenue per share.

Unlike the P/E ratio, P/S remains meaningful for companies with negative earnings — early-stage growth companies, biotech firms pre-profitability, or businesses in a cyclical downturn — since revenue is harder to manipulate than net income and rarely turns negative.

Equity analysts and portfolio managers use P/S to screen and compare companies within the same sector, retail investors evaluate growth stocks that aren't yet profitable, and value investors look for low P/S ratios as a potential signal of undervaluation relative to peers.

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Comments (1)

  • Editorial team

    Two companies can both show a P/S of 2 and still be very different if one keeps a 30 percent net margin on its sales and the other keeps 2 percent. Read the ratio together with margins and growth. You can also use per-share figures: price per share divided by revenue per share gives the same result as market cap over revenue. Which sector are you comparing, and which revenue period do you use?

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