# Price-to-Sales Ratio Calculator

Calculate the price-to-sales ratio (P/S) for any stock. Compare market cap to revenue and evaluate whether a company is over- or under-valued relative to sales.

## What this calculates

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.

## Inputs

- **Calculation Method** — options: Market Cap / Revenue, Share Price / Revenue Per Share — Choose which inputs to use.
- **Market Capitalization** ($) — min 0 — Total market capitalization of the company.
- **Annual Revenue** ($) — min 0 — Total revenue for the trailing twelve months (TTM).
- **Share Price** ($) — min 0.01 — Current market price per share.
- **Revenue Per Share** ($) — min 0.01 — Annual revenue divided by shares outstanding.

## Outputs

- **Price-to-Sales Ratio** — How much investors pay per dollar of revenue.
- **Revenue Multiple** — formatted as text — Investors are paying this many times annual revenue.
- **Implied Revenue Premium** — formatted as percentage — Premium above 1x revenue that investors are paying.

## Details

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.

## Frequently Asked Questions

**Q: What is a good price-to-sales ratio?**

A: It depends entirely on the industry and growth rate. A P/S of 1.0 might be expensive for a grocery chain but cheap for a SaaS company growing 40% annually. Generally, P/S under 2.0 is considered value territory for most industries. The best approach is comparing a company's P/S to its direct competitors and its own historical average.

**Q: When should I use P/S instead of P/E?**

A: Use P/S when the company is not yet profitable (negative earnings make P/E meaningless), when earnings are highly volatile or distorted by one-time items, or when comparing companies with very different cost structures. P/S is also more stable than P/E because revenue is harder to manipulate through accounting choices.

**Q: What is the difference between P/S and EV/Revenue?**

A: P/S uses market capitalization (equity value only), while EV/Revenue uses enterprise value (equity plus debt minus cash). EV/Revenue is more accurate for comparing companies with different capital structures. A company with heavy debt will look cheaper on P/S than EV/Revenue. For companies with minimal debt, the two ratios are similar.

**Q: Can P/S ratio predict future stock returns?**

A: Research shows that low P/S stocks tend to outperform high P/S stocks over long periods. Ken Fisher's 1984 book 'Super Stocks' popularized P/S as a value screening tool. However, P/S alone is not enough -- you also need to consider revenue growth trajectory, profit margins, and competitive position. A cheap P/S on a shrinking business is a value trap.

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Source: https://vastcalc.com/calculators/finance/price-to-sales
Category: Finance
Last updated: 2026-04-08