GlossaryP/S Ratio

P/S Ratio

P/S

Share price compared to revenue — useful when there's no profit yet.

The price-to-sales ratio divides share price by revenue per share. Because it doesn't depend on profitability, it's the go-to valuation metric for early-stage or loss-making companies where P/E can't be calculated.

The formula

Price per ShareRevenue per Share
= P/S Ratio

Why it matters

  • Works for unprofitable companies, where P/E is undefined or meaningless.
  • Ignores margins entirely — two companies with the same P/S can have very different paths to profit.
  • Best compared within the same industry, since typical margins vary enormously across sectors.

How to read it

< 1×Cheap relative to revenue
1×–5×Typical range
> 5×Priced for rapid growth — common in software

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