GlossaryIntermediate
Price-to-Sales (P/S) Ratio
A valuation multiple comparing share price to revenue per share, useful for evaluating companies without positive earnings.
The Price-to-Sales (P/S) ratio divides a company's share price by its revenue per share, comparing market valuation directly to top-line sales rather than to profit.
Because it's based on revenue rather than earnings, P/S remains calculable (and sometimes more useful) for companies that aren't yet profitable, unlike P/E, which breaks down entirely for a company with negative or zero earnings. See Kaavon's dedicated P/S Ratio article for the full calculation.
Examples
- P/S remains calculable for a company with negative earnings, a scenario where P/E simply doesn't produce a meaningful number.
- A low P/S ratio alone doesn't indicate a bargain — it says nothing about the company's actual profitability or cost structure.