— Stock Market
Price-to-Sales Ratio Calculator
Calculate price-to-sales for companies where revenue matters more than earnings. Enter market cap and sales, or price and sales per share, then add debt and cash for EV/Sales and growth to see how the multiple changes.
P/S ratio
5
Try: $10B cap, $2B sales, With debt & cash (EV/Sales), Growth: forward P/S at 25%, Per share: $20 price, $4 sales
— Forward P/S over time
Download— How it works
P/S = market capitalization ÷ revenue = share price ÷ sales per share. Sales per share = revenue ÷ shares outstanding. EV/Sales = enterprise value ÷ revenue, where enterprise value = market cap + debt − cash.
When earnings fail, use sales
The price-to-sales ratio answers a simple question: how much are you paying for each dollar of the company’s revenue? A P/S of 5 means the market values the company at five times its annual sales. Its great advantage is robustness — revenue is positive and far less easy to massage than earnings, so P/S works for loss-making start-ups, cyclical companies in a downturn, and turnarounds where the P/E is negative or meaningless. It’s the multiple analysts reach for when a company has sales but no profit.
Worked example — a $10bn market cap on $2bn of revenue: P/S = 10 ÷ 2 = 5. With 500m shares, that’s sales per share of $4 and a $20 share price — and price ÷ sales per share gives the same 5.
EV/Sales — counting the debt
P/S has a blind spot: it uses market cap, which ignores debt. Two companies with identical sales and market caps look equally valued on P/S, but if one is loaded with debt it’s actually more expensive to a buyer who must assume that debt. EV/Sales fixes this by using enterprise value — market cap plus debt minus cash — in place of market cap. It’s the more complete multiple for comparing companies with different capital structures, and the one acquirers favour. Enter debt and cash to see it alongside the plain P/S.
Growing into the multiple
A high P/S isn’t necessarily expensive — for a fast grower, today’s sales understate tomorrow’s. Enter a revenue growth rate and the forward-P/S table shows the multiple falling each year as sales climb, even with the price held flat: a company at 5× sales growing 25% a year is at roughly 2.6× on year-three revenue. That’s how growth investors justify rich multiples. The crucial caveat: P/S says nothing about profitability — a company can have huge sales and never make money — and P/S norms differ enormously by industry, so a software firm at 10× and a grocer at 0.4× can both be fairly valued. Compare like with like, and pair P/S with a margin check. Not investment advice.
— Reader questions
How do I calculate the price-to-sales ratio?
Divide market capitalization by total revenue, or equivalently the share price by sales per share. A $10bn market cap on $2bn of sales gives a P/S of 5. Sales per share is revenue divided by shares outstanding.
What is a good price-to-sales ratio?
It depends heavily on the industry and growth rate. Broadly, a P/S below 1 is low and above 3–4 is rich, but high-growth software companies routinely trade above 10 while low-margin retailers sit well below 1. Always compare within a sector.
Why use P/S instead of P/E?
Because the P/E needs positive earnings. For loss-making, early-stage or turnaround companies, earnings are negative or zero and the P/E is meaningless — but revenue is still positive, so the P/S still works. It’s also harder to manipulate than earnings.
What is the difference between P/S and EV/Sales?
P/S uses market cap; EV/Sales uses enterprise value (market cap + debt − cash). EV/Sales accounts for debt, so it’s fairer when comparing companies with different leverage, and it’s the measure acquirers prefer.
What is the main weakness of the P/S ratio?
It ignores profitability entirely. A company can have enormous sales and still lose money on every one, so a low P/S can be a value trap. Always pair P/S with a look at margins and the path to profit.