Price-to-sales (P/S)

Price per rupee of revenue.

Price-to-sales compares market cap to revenue. It's useful when a company has little or no profit yet (so P/E doesn't work), because revenue is still positive. P/S = Market cap ÷ Annual revenue Market cap Rs 1,000 crore, revenue Rs 500 crore. P/S = 2. Works for loss-making firms Revenue is harder to manipulate than profit Good for early-stage or cyclical firms Ignores profitability entirely High-revenue, no-profit can still be a bad business Varies hugely by industry

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: The Ratios.