Price-to-Sales (P/S)

Valuing growth without profit.

What do you do when a company isn't profitable yet? You use the P/S Ratio. It measures how much investors pay for every dollar of revenue the company generates.

How to Calculate?

P/S Ratio = Market Cap / Total Revenue

Why It Matters?

• For Startups: Essential for valuing high-growth tech companies that haven't made a profit yet.
• Hard to Fake: Earnings can be manipulated with accounting tricks, but Revenue (Sales) is much harder to fake.
• Comparison: Always compare P/S ratios against competitors in the same industry.