Price-to-Sales (P/S) Ratio Calculator
Calculate the price-to-sales ratio for any stock using market cap and annual revenue.
Compare P/S across industries to spot overvalued or undervalued stocks.
Price-to-Sales (P/S) Ratio
The Price-to-Sales ratio compares a company’s market capitalization to its annual revenue. It is one of the few valuation metrics that still works when a company has no earnings, which makes it the default tool for growth companies and startups.
Two equivalent formulas:
P/S = Market Capitalization ÷ Annual Revenue
P/S = Stock Price ÷ Revenue Per Share
How to interpret P/S:
| P/S Range | General interpretation |
|---|---|
| < 1 | Very cheap, often a distressed or slow-growth business |
| 1 – 3 | Typical for mature, low-margin businesses |
| 3 – 10 | Common for profitable growth companies |
| 10 – 30 | High-growth SaaS, biotech, or tech companies |
| > 30 | Speculative pricing, market expects explosive growth |
Industry benchmarks matter most:
- Grocery retail: P/S typically 0.2 – 0.5
- Automotive: P/S typically 0.3 – 1.0
- Software/SaaS: P/S typically 5 – 20+
- Pharmaceuticals: P/S typically 2 – 8
Always compare P/S within the same industry. A P/S of 4 is cheap for software but expensive for a grocery chain.
When P/S is more useful than P/E:
- Company has negative earnings (startup, turnaround)
- Earnings are distorted by one-time charges or write-offs
- You want to value a pre-profit growth company
Limitations, and the one that matters most:
Revenue is not profit, and P/S is blind to the difference. A company on a P/S of 1 earning a 2% net margin and one on a P/S of 1 earning 40% are not remotely comparable, and the ratio says the same thing about both. This is why P/S numbers cannot travel between industries: a grocer at 0.3x and a software business at 8x may be priced identically on what actually reaches shareholders.
The fix is to convert. Divide P/S by the net margin and you get the P/E the price implies:
Implied P/E = P/S ÷ Net Margin
A P/S of 8 on a 25% margin is a P/E of 32. The same P/S of 8 on a 3% margin is a P/E of 267. Enter a net margin below and the calculator does this, which turns P/S from a number you have to take on faith into one you can compare against every other stock you own.
Two smaller cautions:
- Always pair it with gross margin and operating leverage. A business at 80% gross margin has room to become profitable at scale; one at 15% does not.
- Revenue growth can justify a high P/S, but only when margin expansion comes with it. Growing 40% a year at a permanent loss just gets you to a bigger loss.
Example:
- Market cap: $5 billion, Annual revenue: $500 million
- P/S = 5,000M ÷ 500M = 10
- At a 20% net margin that is an implied P/E of 50: reasonable for high-growth software, expensive for a retailer, and impossible to judge without knowing which one you are looking at
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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