---
title: "Definition of P/S Ratio"
url: https://signalscreener.fr/definition/price-to-sales/
markdown_url: https://signalscreener.fr/definition/price-to-sales.md
description: "P/S Ratio values company based on revenue instead of earnings."
type: glossary-definition
site: Signal Screener
language: en
keywords:
  - "P/S Ratio"
  - "Price-to-Sales Ratio"
translations:
  es: https://signalscreener.fr/es/definition/price-to-sales.md
  fr: https://signalscreener.fr/fr/definition/price-to-sales.md
  zh: https://signalscreener.fr/zh/definition/price-to-sales.md
---

# Price-to-Sales Ratio

## What is P/S Ratio?

P/S Ratio values company based on revenue instead of earnings. Useful for unprofitable companies or comparing across industries.

## Think of it like this

Two food trucks each sell $100K yearly. Truck A costs $50K (P/S = 0.5), Truck B costs $200K (P/S = 2). Truck A is cheaper relative to sales!

## Formula

```
P/S = Market Cap / Annual Revenue
```

- **Market Cap**: Total company value
- **Annual Revenue**: Total sales over one year

## Why it matters

- Values unprofitable companies
- Can't be manipulated like earnings
- Compare companies across industries
- Shows what investors pay per dollar of sales

## What's a good value?

| Range | Rating | What it means |
|---|---|---|
| < 1 | Undervalued | Potentially cheap |
| 1-2 | Fair Value | Reasonable for mature companies |
| 2-5 | Growth Premium | Typical for growth stocks |
| > 5 | Expensive | High expectations or overvalued |

## Real-world example

Walmart P/S: 0.7 - low margin business. Zoom P/S: 8 - high growth SaaS. Car manufacturer: 0.3 - capital intensive. Profitless startup P/S: 20 - pure speculation.

## Things to watch out for

- Ignores profitability
- High revenue doesn't mean profits
- Varies dramatically by industry
- Debt not considered

---

This is educational content, not financial advice.

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