Price-to-Sales Ratio Calculator
See how much investors are paying per dollar of a company's revenue. Enter market capitalization and annual revenue, or use share price and revenue per share. The P/S ratio is especially useful for valuing companies that are not yet profitable.
The price-to-sales ratio measures how much the market values each dollar of a company's revenue. A P/S of 2.5 means investors pay $2.50 for every $1 of annual revenue. The formula: Market Cap / Annual Revenue, or equivalently, Share Price / Revenue Per Share.
For example, a company with a $5 billion market cap and $2 billion in annual revenue has a P/S of 2.5. An investor buying at this valuation expects the company to either grow revenue significantly or achieve high profit margins (or both) to justify the premium.
Why P/S Matters
P/S is the go-to valuation metric for unprofitable companies where P/E ratio does not work (you cannot divide by negative earnings). High-growth SaaS companies, biotech firms, and early-stage tech companies are commonly valued on P/S.
Typical P/S ranges vary dramatically by industry:
- Grocery/Retail: 0.2-0.8x (thin margins, slow growth)
- Industrial/Manufacturing: 1-3x
- Software/SaaS: 5-15x (high margins, recurring revenue)
- Hypergrowth tech: 20-50x+ (during market peaks)
A low P/S relative to peers suggests the stock may be undervalued, but always check why. Maybe revenue is declining, margins are poor, or there is a company-specific problem the market has already priced in.