Ten Stock Analysis Ratios Used By The Pros: Price-to-Sales

Fourth Key Ratio :

Price-to-Sales

As with all ratios mentioned, Price-to-Sales is most useful when comparing companies in the same industry group. Earnings may be small or non-existence in young companies or those in the midst of a period of rapid growth. Price-to-sales takes the top line revenue as the denominator in this ratio to focus on the cash generating capabilities of a company.

Formula:

Market Capitalization


Revenue

Price-to-Sales Ratio = Market Capitalisation/Revenue

Or

Price-to-Sales Ratio = Market Value per Share/Sales per Share

EPS = Net Income/Number of Share Outstanding

To download a complete PDF of all the ratios we will be talking about in this article, please complete the form below.


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