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.

More in The Ratios

• PEG Ratio: P/E adjusted for growth.
• Return on Equity (ROE): Profit from owners' money.
• Return on Assets (ROA): Profit from everything it owns.
• Return on Capital Employed: Profit from all long-term capital.
• Profit Margins: How much of each sale becomes profit.
• Dividend Yield: Cash returned per rupee invested.
• Dividend Payout Ratio: How much profit is paid out.
• Current and Quick Ratios: Can it pay its short-term bills?
• Interest Coverage: Can it comfortably pay its interest?
• Debt-to-equity: How much the company borrows.
• Asset Turnover: Sales generated per rupee of assets.
• P/E Ratio: Price paid per rupee of earnings.

All chapters in Learn NEPSE Investing