MULTIBAGGER SMALL / MID CAPS & LONG TERM INVESTING REPORT >>> FREE DOWNLOAD
TECHNO-FUNDA (POTENTIAL MULTIBAGGER) STOCK 2019 REPORT >>> FREE DOWNLOAD
PAST PERFORMANCE >>> HIDDEN GEMS, VALUE PICKS & WEALTH-BUILDER >>> VIEW / DOWNLOAD
SERVICES: HIDDEN GEMS | VALUE PICKS | 15% @ 90 DAYS | WEALTH-BUILDER
SUBSCRIPTION: FREE SUBSCRIPTION | PAID SUBSCRIPTION | PAYMENT OPTIONS

Friday, August 5, 2011
Price to Sales - P/S
We have a number of fundamental analysis tools available when it comes to evaluating companies with earnings.
Does that mean companies that don’t have any earnings are bad investments? Not necessarily, but you should approach companies with no history of actually making money with caution.
The Internet boom of the late 1990s was a classic example of hundreds of companies coming to the market with no history of earning – some of them didn’t even have products yet. Fortunately, that’s behind us.
However, we still have the problem of needing some measure of young companies with no earnings, yet worthy of consideration. After all, Infosys had no earnings at one point in its corporate life.
One ratio you can use is Price to Sales or P/S ratio. This metric looks at the current stock price relative to the total sales per share. You calculate the P/S by dividing the market cap of the stock by the total revenues of the company.
You can also calculate the P/S by dividing the current stock price by the sales per share.
P/S = Market Cap / Revenues
or
P/S = Stock Price / Sales Price Per Share
Much like P/E, the P/S number reflects the value placed on sales by the market. The lower the P/S, the better the value, at least that’s the conventional wisdom. However, this is definitely not a number you want to use in isolation. When dealing with a young company, there are many questions to answer and the P/S supplies just one answer.
You can Subscribe to FREE Email Updates, so that you do not miss out any article that can be valuable to you and your investments!!
Our Services: Hidden Gems | Value Picks | 15% @ 90 DAYS | WEALTH-BUILDER
Posted by Saral Gyan at 12:45:00 AM
Labels:
Price to Sales
Price to Sales - P/S
2011-08-05T00:45:00+05:30
Saral Gyan
Price to Sales|