Financial Encyclopedia
P/S ratio
Definition
P/S is a ratio that compares a company’s stock price to its sales.
Example
Suppose it is necessary to value O’Key. It is a public company whose main competitors in Russia are Magnit, X5 Retail Group and Lenta.
It is necessary to collect data on companies for the 2nd quarter of 2022.
P/E (Magnit) = 0.2
P/E (X5 Retail Group) = 0.1
P/E (Lenta) = 0.1
Mean = (0.2 + 0.1 + 0.1) / 3 = 0.13
O'Key's P/E is 0.0, below the industry average.
More detailed
P/S = Price / Sales
The multiplier allows to understand how much an investor pays for 1 ruble of revenue.
It is generally accepted that the normal value of the indicator is <2. Therefore, the lower the P / S, the better, and the less the investor pays for each ruble of revenue. If P/S < 1, the investor can buy this ruble at a discount.
P/S is used to compare companies in the same industry.
According to Ranks methodology, this indicator is analyzed in the Value block and used along with other indicators to calculate the score. The indicator is presented as a % of repurchased shares.
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