What is the Price-to-Sales Ratio?
The Price-to-Sales Ratio (PSR) is used to evaluate a stock of the particular company in relation to its historic performance, other companies and the market. The PSR is derived from dividing the current price of the stock by the revenue per share for the period of 12 months.
PSR = Shares Price/Revenue per Share
Why You Care
The PSR keeps changing significantly across the different industries. That’s why it is beneficial only when comparing the companies of similar industry. As the ratio doesn’t consider any debt or other expenses, it has many limitations on its own.
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