Price / Sales
P/SValuation relative to revenue, useful when profits are thin
Definition
Price-to-Sales compares a company's market cap to its total annual revenue. It's especially useful for companies that aren't yet profitable (many early-stage tech or biotech companies) where P/E can't be computed. It shows how much investors are paying per dollar of revenue.
Market Cap ÷ Total Revenue (trailing 12 months)
Example
A SaaS startup with $500M revenue and $5B market cap has P/S = 10x. A legacy retailer with $10B revenue and $8B market cap has P/S = 0.8x. Very different investor expectations.
Typical range
< 2x for value stocks; 5-15x+ common for high-growth tech