price to sales ratio
Definition
A stock's capitalization divided by its sales over the trailing 12 months. The value is the same whether the calculation is done for the whole company or on a per-share basis. A low price to sales ratio (for example, below 1.0) is usually thought to be a better investment since the investor is paying less for each unit of sales. However, sales don't reveal the whole picture, since the company might be unprofitable. Because of the limitations, price to sales ratio are usually used only for unprofitable companies, since such companies don't have a price/earnings ratio (P/E ratio).
Use this term in a sentence
“ You should do your best to make the price to sales ratio as profitable as it can be for your company. ”
“ The price to sales ratio from 2014 was lagging behind quite a bit and he wasn't sure if Simon would be able to recover his losses in the new year. ”
“ Based on the price to sales ratio, stock in E-Bay appears to be a good investment now, but with the growing popularity of on-line shopping, there may not be a profitible long-term investment in the company. ”
