Price to Sales Ratio, usually the abbreviation P/S is used. It is a term that refers to the share current price relative to the total sales per share.
P/S is convenient to use in the measurement of young and new companies without profit yet, for which it is not possible to use P/E ratio. P/S varies by industry and it isn’t affected by taxation.
P/S = Share Price / Sales per Share
Use of the P/S in practice: The indicator helps an investor to decide whether to invest in certain shares. In the literature it is recommended to buy shares with P/S to the value of 1, up to 3. The value of 5 indicates extreme overpricing of the share.
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