Investing Dictionary
Company Health

What is Price-to-Sales (P/S)?

How much investors pay for each dollar of a company's revenue

Full Explanation

P/S ratio = market cap ÷ annual revenue. Useful for valuing companies that aren't profitable yet. A P/S of 5 means investors pay $5 for every $1 of revenue.

Pro Tip

Growth stocks often have high P/S. The question is whether growth justifies the premium.

Related Company Health Terms

Guidance

A company's prediction for their own future performance

Forward P/E

P/E ratio based on expected future earnings, not past ones

Balance Sheet

A snapshot of everything a company owns and owes

Gross Margin

Revenue left after subtracting the direct cost of making the product

View all Company Health terms →

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