← Glossary · Financial ratios
P/S ratio (price-to-sales)
Market value compared with annual revenue.
The P/S ratio divides market capitalisation by annual revenue. It also works for companies that are not yet profitable, where the P/E ratio does not help.
As with P/E, comparisons within a sector are more useful than fixed thresholds. A supermarket with thin margins will naturally have a lower P/S than a high-margin software company.