Price-to-Sales Ratio Calculator
From market cap and total revenue, compute the price-to-sales ratio (P/S) to value a stock by its revenue.
Input Data
Results
At a glance:The price-to-sales ratio values a company by its top line. P/S = market capitalisation ÷ total revenue. A low P/S may signal cheap sales; a high P/S, expected margin or growth. It helps when earnings are thin or negative.
Formula
P/S = market capitalisation ÷ total revenue.
How to Use
- Enter the market capitalisation.
- Enter the total revenue.
- Read the P/S ratio and compare within the sector.
FAQ
Why use P/S when a company is loss-making?
When earnings are negative, the P/E ratio breaks down, but revenue is almost always positive, so P/S stays usable. That is why it is favoured for early-stage and not-yet-profitable firms (e.g. high-growth tech, biotech), and why it is common in bubbles to gauge 'how much the market pays per dollar of sales'.
What is a good P/S value?
By itself it is hard to call good or bad — compare within the same industry. A high gross-margin sector (software) can bear a higher P/S; a low-margin sector (retail) deserves a much lower one. As a rule of thumb, below 1 may suggest undervaluation, but it can also signal weak profitability; above 10 for a mature firm often implies very high growth expectations.
What are the limitations of P/S?
It ignores profitability and cost structure entirely — a firm with huge sales but no profit can carry a high P/S and still be unprofitable. It also ignores leverage and the capital structure. So P/S should be combined with margins (gross/net) and with P/E or P/B before any conclusion.
Is P/S related to the profit margin?
Yes. Roughly, P/S ≈ P/E × net profit margin. In other words, for the same P/E, a higher-margin firm has a higher P/S; the more profitable the firm, the higher the sales multiple it can justify. That is why software (high margin) commands high P/S while retail (thin margin) stays low.
How does Hong Kong's market differ for P/S, and what to watch?
Hong Kong's market is 'banks plus property plus Mainland-related' heavy, with fewer pure tech names than the US, but P/S is still useful for certain segments. First, for not-yet-profitable growth firms (new-economy, biotech, some tech hardware) where P/E is meaningless, P/S is a quick valuation yardstick — but check the sector's typical margin, because a mainland internet firm and a Hong Kong retailer carry very different justifiable P/S. Second, watch for one-off or non-recurring revenue (e.g. a one-time big contract) inflating sales and making P/S look deceptively low — strip those out. Third, revenue recognition and currency: cross-border or RMB-earning firms should confirm whether sales are consolidated and at what rate, as it affects the denominator. Fourth, P/S says nothing about profit — always pair it with gross/net margin and the cash-flow statement; a high P/S 'hot stock' can still be loss-making. Fifth, HKEX-listed mainland firms' financials follow different standards; confirm the revenue definition is comparable. In short, use P/S mainly where P/E fails (loss-making/high-growth), compare within the same sector, and always combine with margin and cash flow — never on its own.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.