See how much investors pay for each dollar of a company's revenue. Enter market cap and annual sales, or share price and sales per share, then add an industry average to find out whether the stock looks expensive or cheap relative to its peers.
Last updated:
Calculate from
$
$
$
Annual revenue ÷ shares outstanding.
$
Last 12 months of sales, or next year's estimate for forward P/S.
Compare (optional)
×
Gives the implied value and premium / discount.
%
Converts P/S into an implied P/E.
% / yr
For the growth-adjusted P/S.
Enter your values to see the result.
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How to use the Price to Sales Ratio Calculator
Pick your inputs: company totals (market cap and revenue), per-share figures, or price plus shares outstanding and revenue.
Enter revenue for the last 12 months (trailing P/S) or next year's estimate (forward P/S).
Add the industry average P/S to see the premium or discount and the implied value.
Optionally add net margin and revenue growth to translate P/S into an implied P/E and a growth-adjusted figure.
Review the results and the multiples table, then copy the summary or download the table.
Price-to-sales formulas
P/S ratio = market capitalization ÷ annual revenue
Per share: P/S = share price ÷ sales per share, where sales per share = revenue ÷ shares outstanding
Premium / discount to industry = (company P/S ÷ industry P/S − 1) × 100
Implied P/E = P/S ÷ net profit margin
Implied value = industry P/S × revenue
Worked example: a company with a market cap of $12 billion reported $3 billion of revenue over the last four quarters. P/S = 12 ÷ 3 = 4.0×.
If similar companies trade at 2.5× sales, the stock carries a 60% premium, and at the industry multiple it would be worth 2.5 × $3 billion = $7.5 billion.
With a 12% net margin, its implied P/E is 4 ÷ 0.12 ≈ 33.
P/S, margin and implied P/E
Because P/E = P/S ÷ net margin, the same P/S means very different things at different margins:
P/S ratio
Net margin 3%
Net margin 8%
Net margin 15%
Net margin 25%
0.5×
16.7
6.3
3.3
2.0
1×
33.3
12.5
6.7
4.0
2×
66.7
25.0
13.3
8.0
4×
133.3
50.0
26.7
16.0
8×
266.7
100.0
53.3
32.0
Values in the table are implied P/E ratios. A 2× P/S looks cheap for a business with 25% margins (P/E 8) but expensive for one with 3% margins (P/E 67).
Tips for using the price-to-sales ratio
Compare within an industry. Software, retail, banks and utilities have structurally different margins, so their P/S ratios are not comparable.
Check debt. P/S ignores borrowing. For companies with significant debt or cash, look at EV/Sales from the enterprise value calculator as well.
Use consistent revenue. Trailing 12-month revenue avoids seasonal swings; don't mix trailing and forward figures.
Watch revenue quality. Recurring subscription revenue usually deserves a higher multiple than one-off project or commodity sales.
Frequently asked questions
How do you calculate the price-to-sales ratio?
P/S ratio = market capitalization ÷ annual revenue. Per share, it is share price ÷ sales per share, where sales per share = revenue ÷ shares outstanding. A company worth $12 billion with $3 billion of yearly sales has a P/S of 4×.
What is a good price-to-sales ratio?
There is no universal good number because typical P/S ratios differ widely by industry. Low-margin businesses such as grocery retail or distribution often trade below 1×, while high-margin software companies can trade at 5× to 15× or more. A P/S is most useful compared with direct competitors and the company's own history.
Why compare P/S with an industry average?
Revenue multiples mostly reflect expected profit margins and growth, which are similar within an industry. A P/S well above peers means investors expect better margins or faster growth; a P/S well below peers can mean the stock is cheap or that its business is weaker.
How are P/S and P/E related?
P/E = P/S ÷ net profit margin. A company with a P/S of 4 and a 12% net margin has an implied P/E of about 33. This is why a high P/S can be reasonable for a company with high margins, and why a low P/S can still be expensive when margins are thin.
When is the P/S ratio most useful?
P/S works when earnings are negative or temporarily depressed, for example for young growth companies or cyclical businesses at a low point, because revenue is positive and more stable than profit. It is also harder to distort with accounting choices than earnings.
What are the limitations of P/S?
Revenue says nothing about profitability or debt. Two companies with the same P/S can have very different margins, and a company with large debt looks cheaper on P/S than it really is. EV/Sales, which uses enterprise value instead of market cap, adjusts for debt and cash.
What is the difference between trailing and forward P/S?
Trailing P/S uses revenue from the last 12 months of reported results. Forward P/S uses analysts' estimates of the next 12 months. Fast-growing companies have much lower forward P/S than trailing P/S, so use the same type when comparing companies.
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