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What is the Price to Sales Ratio (P/S Ratio)?

The Price to Sales Ratio, also known as the PSR, is a valuation metric that looks at a stock’s market price versus its per share revenue.

Alternatively, you can calculate it by dividing a company’s total market capitalization by its total revenue in the most recent fiscal year. The ratio indicates how much value (how much investors are willing to pay) is placed on each dollar of revenue generated by the company.

A high PSR could mean a company is overvalued, or that investors are betting on future growth and therefore willing to pay a premium for current ownership. The opposite could be said of a low relative PSR.

Keywords: market capitalization, valuation, ratios, price to sales ratio, stock price, fiscal year, Price to Sales Ratio (P/S Ratio),