10 stock analysis ratios used by the pros

Price-to-Sales

As with all ratios mentioned, Price-to-Sales is most useful when comparing companies in the same industry group.

Earnings may be small or non-existence in young companies or those in the midst of a period of rapid growth.

Price-to-sales takes the top line revenue as the denominator in this ratio to focus on the cash generating capabilities of a company.

Formula:

Price-to-Sales Ratio = Market Capitalisation/Revenue

Or

Price-to-Sales Ratio = Market Value per Share/Sales per Share

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