Calculate the price-to-sales ratio from market capitalisation and total revenue as a revenue-based valuation multiple for comparing companies.
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Result
Price-to-sales ratio — investors pay 2.5 for every unit of annual revenue.
How to read this result
A P/S of 2.5× is moderate — typical of established companies with stable revenue.
Equity Valuation
The price-to-sales ratio (P/S) compares a company's market capitalisation to its total revenue, providing a valuation multiple useful for companies with negative earnings or cyclical profit patterns.
P/S tells investors how much the market pays for each unit of revenue. It is especially useful for valuing early-stage or loss-making companies where P/E ratios are meaningless because earnings are negative.
Revenue is harder to manipulate than earnings, making P/S a more stable valuation metric. However, it ignores profitability entirely — a company can have a low P/S and still be a poor investment if margins are thin or declining.
Divide market cap by trailing twelve-month (TTM) revenue. This price-to-sales ratio formula explanation shows how the entered values flow into the main result and the supporting figures the calculator returns.
P/S = Market Capitalisation / Total Revenue
Alternatively: P/S = Stock Price / Revenue Per Share. Use TTM revenue for consistency.
A company has a market cap of 5,000,000 and annual revenue of 2,000,000. P/S = 5,000,000 / 2,000,000 = 2.5×. Investors pay 2.50 for every 1 of revenue. The example section should make the workflow concrete, so this page keeps the arithmetic tied to a plausible scenario rather than leaving the result as an abstract formula.
Ignores profitability, capital structure, and cash flow. Not comparable across industries with different margin structures. Revenue recognition policies can distort comparisons. The extra explanation keeps the page useful for searchers who need to understand not just the number, but also the assumption set behind it.
Frequently asked questions
Industry-dependent. Mature consumer staples may trade at 1–2×. High-growth SaaS companies regularly trade at 10–20× or higher. Always compare within the same sector.
Use P/S when the company has negative earnings, volatile profits, or is in an early growth stage. P/S provides a valuation anchor when P/E is not meaningful.
No. P/S uses market cap (equity value only). For a debt-adjusted version, use EV/Sales (Enterprise Value / Sales), which includes debt and excludes cash.
No — market cap and revenue are both positive in normal circumstances. If market cap is somehow negative (theoretical edge case), the ratio would be meaningless.
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