Price to Sales Ratio Calculator
Calculate and analyze P/S ratios to evaluate stock valuations and compare companies based on their revenue.
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Formula Reference
Revenue Per Share
RPS = Total Revenue / Shares Outstanding
P/S Ratio
P/S = Stock Price / Revenue Per Share
P/S to Growth (PEG)
P/SG = P/S Ratio / Growth Rate
Implied P/E Ratio
Implied P/E = P/S Ratio × Profit Margin
P/S Ratio Interpretation
- P/S < Industry: Potentially Undervalued
- P/S = Industry: Fairly Valued
- P/S > Industry: Potentially Overvalued
- Lower P/S: Better Value
- P/SG < 1: Potentially Undervalued
How to Use
- Enter company financial data
- Input industry comparison data
- Click “Calculate” to analyze
- Review results and charts
Price to Sales Ratio Calculator: A Simple Guide
Investors use different financial ratios to evaluate stocks. One useful ratio is the Price to Sales (P/S) Ratio. It helps determine if a stock is overpriced or a good deal.
A Price to Sales Ratio Calculator makes this calculation quick and easy. This article explains what the P/S ratio is, why it matters, and how to use a calculator to find it.
What is the Price to Sales (P/S) Ratio?
The Price to Sales Ratio compares a company’s stock price to its revenue per share. It shows how much investors pay for each dollar of sales the company generates.
Formula for P/S Ratio:
P/S Ratio = Stock Price\Revenue per Share
- Stock Price = Current market price of one share.
- Revenue per Share = Total revenue divided by outstanding shares.
A lower P/S ratio may mean the stock is undervalued. A higher ratio may mean it is overpriced.
Why is the P/S Ratio Important?
- Useful for Unprofitable Companies
- Unlike P/E ratio, P/S works even if a company has no profits.
- Helps evaluate startups or firms in growth phases.
- Harder to Manipulate Than Earnings
- Revenue is less likely to be distorted than net income.
- Makes P/S a reliable measure for comparison.
- Good for Comparing Similar Companies
- Investors can compare P/S ratios within the same industry.
How to Calculate P/S Ratio Manually
Here’s a step-by-step breakdown:
Step 1: Find the Stock Price
Check the current market price of the stock. For example, if Company Y’s stock is trading at $100 per share, this is the stock price.
Step 2: Calculate Revenue per Share
Revenue per share is calculated as:
Revenue per Share= Total Revenue\Total Outstanding Shares
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- Total Revenue = Found in the company’s income statement.
- Total Outstanding Shares = Number of shares available in the market.
Example:
- Total Revenue = $2 billion
- Outstanding Shares = 50 million
- Revenue per Share = $2 billion / 50 million = $40 per share
Step 3: Divide Stock Price by Revenue per Share
Using the numbers from above:
P/S Ratio= $100\$40= 2.5
This means investors pay $2.5 for every $1 of revenue.
Why Use a Price to Sales Ratio Calculator?
Manual calculations take time. A P/S Ratio Calculator automates the process. Here’s why it’s helpful:
- Saves Time – No need to dig through financial statements.
- Reduces Errors – Eliminates manual math mistakes.
- Quick Comparisons – Compare multiple stocks in seconds.
How to Use a P/S Ratio Calculator
Most calculators follow the same steps:
- Enter the Stock Price – Input the current share price.
- Enter Total Revenue – Found in the company’s financial reports.
- Enter Outstanding Shares – Usually listed in the balance sheet.
- Click Calculate – The tool computes the P/S ratio instantly.
Example Calculation Using a Calculator
| Input | Value |
|---|---|
| Stock Price | $150 |
| Total Revenue | $3 billion |
| Outstanding Shares | 100 million |
Calculation:
- Revenue per Share = $3 billion / 100 million = $30
- P/S Ratio = $150 / $30 = 5
The calculator shows the P/S ratio is 5.
Interpreting the P/S Ratio
- P/S < 1 – May be undervalued (potential bargain).
- P/S = 1-3 – Fairly valued for many industries.
- P/S > 5 – May be overvalued (caution needed).
However, compare with industry averages. Tech companies often have higher P/S ratios than retailers.
Limitations of the P/S Ratio
- Ignores Profitability – A company with high sales but no profits may still be risky.
- Varies by Industry – Some sectors naturally have higher P/S ratios.
- Doesn’t Consider Debt – A company with high debt may look better than it is.
Best Practices When Using P/S Ratio
- Compare with Competitors – Check P/S ratios of similar companies.
- Look at Historical Trends – Is the ratio rising or falling over time?
- Combine with Other Ratios – Use P/E, P/B, and Debt-to-Equity for better analysis.
Free Online P/S Ratio Calculators
Many websites offer free calculators, including:
- Yahoo Finance
- Investing.com
- Bloomberg
Just enter the required data, and the tool does the rest.
Conclusion
The Price to Sales Ratio is a useful tool for stock analysis. It helps investors find undervalued stocks and avoid overpriced ones.
A P/S Ratio Calculator makes this process fast and accurate. By understanding how to use it, you can make smarter investment decisions.
Always compare ratios within the same industry. Combine P/S with other metrics for the best results.
Final Tip:
Bookmark a reliable P/S calculator for quick access during stock research. Happy investing!