P/S Ratio in Stock Market Explained (Price-to-Sales Tutorial)
The Price-to-Sales ratio or P/S is calculated by taking the market cap and dividing it by the totals sales (revenue) over the past twelve months. Similar to P/E, the lower the P/S value, the better. Less than 1 is typically considered excellent, 1 to 3 is typically considered good, and above 3 is seen as overvalued. P/S should always be used in conjunction with other metrics and should be compared to P/S I companies within the same industry. It’s great for valuing growth stocks in my opinion and especially helpful in valuing companies that are not yet profitable since they do not have a P/E to reference. P/S does not take expenses and debt into account and does not tell you whether a company can be profitable in the future. I personally use P/S along with many other metrics to formulate a sold thesis based on fundamental analysis.
**I am not a financial advisor or crypto advisor; this video is meant to be used for entertainment purposes only and represents only my personal opinions**
Sources: Investopedia, Personal Experience
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