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 Ratio
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 works even when a company has no earnings — making it especially useful 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:
- Revenue does not equal profit. A company with P/S = 1 but 2% margins is very different from one with 40% margins.
- Always combine with gross margin and operating leverage analysis.
- High revenue growth can justify a high P/S — but only if margin expansion is also expected.
Example:
- Market cap: $5 billion, Annual revenue: $500 million
- P/S = 5,000M ÷ 500M = 10
- Reasonable for a high-growth SaaS company; expensive for a retailer