How do you read P/S (price to sales)?

It helps when a company has no earnings yet, because it has revenue. It says little without the margin: a dollar of revenue is worth far more at a software company with a 30% net margin than at a supermarket chain with 2%. That is why, for a profitable company, our analyses scale the sales multiple to its own net margin. It ignores debt. EV/Sales takes it into account.

P/S (price to sales)

Valuation

Market cap against the last twelve months' revenue.

How it is worked out

Market cap divided by revenue over the last twelve months (the same as price over revenue per share).

How to read it

It helps when a company has no earnings yet, because it has revenue.
It says little without the margin: a dollar of revenue is worth far more at a software company with a 30% net margin than at a supermarket chain with 2%. That is why, for a profitable company, our analyses scale the sales multiple to its own net margin.
It ignores debt. EV/Sales takes it into account.

Example

Market cap $10bn, revenue $4bn: a P/S of 2.5.

Related terms

The other pages on US stocks, free to read. On the company pages, the last three fiscal years are open to everyone, five with a free account, and every year with Ploutos Investor.

US stocksThe market today, the sectors, the largest companies and the week's results.The market's sectorsThe 11 sectors side by side: returns, share of the market, median P/E and dividend.Compare stocksTwo companies side by side: price over up to ten years, with and without dividends, and every figure.US dividend stocksEach dividend's yield next to whether the company's cash covers it and whether it was ever cut.

Explanations of terms for learning, with examples from SEC filings.