Price -- sales ratio - Wikipedia Price -- sales ratio Price -- sales ratio, P / S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company 's market cap by the revenue in the most recent year ; or, equivalently, divide the per - share stock price by the per - share revenue. Also, justified p / s is calculated as ( profit margin × payout × ( 1 + g ) / ( r − g ) ). Unless otherwise stated, P / S is `` trailing twelve months '' ( TTM ), the reported sales for the four previous quarters, although of course longer time periods can be examined. The smaller this ratio ( i.e. less than 1.0 ) is usually thought to be a better investment since the investor is paying less for each unit of sales. However, sales do not reveal the whole picture, as the company may be unprofitable with a low P / S ratio. Because of the limitations, this ratio is usually used only for unprofitable companies, since they do n't have a price -- earnings ratio ( P / E ratio ). The metric can be used to determine the value of a stock relative to its past performance. It may also be used to determine relative valuation of a sector or the market as a whole. PSRs vary greatly from sector to sector, so they are most useful in comparing similar stocks within a sector or sub-sector. Comparing P / S ratios carries the implicit assumption that all firms in the comparison have an identical capital structure. This is always a problematic assumption, but even more so when the assumption is made between industries, since industries often have vastly different typical capital structures ( for example, a utility vs. a technology company ). This is the reason why P / S ratios across industries vary widely. See also Financial ratio References Jump up ^ `` What is Price To Sales Ratio ? definition and meaning ''. InvestorWords.com. Financial ratios Cyclically adjusted price - to - earnings ( CAPE ) Capitalization rate ( Cap Rate ) Cash return on cash invested ( CROCI ) Debt - to - equity ( D / E ) Dividend cover Dividend payout Enterprise value / EBITDA ( EV / EBITDA ) Enterprise value / gross cash invested ( EV / GCI ) Enterprise value / sales ( EV / Sales ) Loan - to - value ( LTV ) Omega Operating margin Price - to - book ( P / B ) Price / cash flow ( P / CF ) Price - earnings ( P / E ) Price - earnings to growth ( PEG ) Price - sales ( P / S ) Profit margin Return on assets ( ROA ) Return on net assets ( RONA ) Return on capital ( ROC ) Return on capital employed ( ROCE ) Return on equity ( ROE ) Return on tangible equity ( ROTE ) Risk - adjusted return on capital ( RAROC ) Risk return ( RRR ) Sharpe Short interest ( SIR ) Sortino Sustainable growth ( SGR ) Treynor This economics - related article is a stub. You can help Wikipedia by expanding it. Retrieved from `` https://en.wikipedia.org/w/index.php?title=Price -- sales_ratio&oldid = 803371589 '' Categories : Financial ratios Economics and finance stubs Talk About Wikipedia Čeština Deutsch Hrvatski Norsk Polski Русский Suomi Svenska Українська 中文 Edit links This page was last edited on 2 October 2017, at 03 : 13. About Wikipedia

Question: what is p s ratio in stock market
Answer: Price–sales ratio