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Sometimes called PSR or P/S ratio, Price-to-sales ratio is a stock valuation metric that many analysts consider to be more reliable than the P/E or Price-to-earnings ratio.
The price to sales ratio can be calculated by dividing the stock price by the revenue per share or by dividing the market capitalization of the company by its most recent fiscal year revenue.
The price to sales ratio is usually used to compare companies that are within the same industry; this is because capital structures and profit margins vary vastly between companies that are not in the same industry and therefore the price to sales ratio of these companies will vary a lot too. For example, a company in the discount retailers industry that have a profit margin of 2% will have a very different price to sales ratio than a company in the Internet industry that have a profit margin of 20%.
In general investors prefer to buy stocks with a low price to sales ratio because in this case the investor is paying less money per unit of sales.
The main problem of the price to sales ratio is that it contains little information about a company. It doesn't contain for example information regarding the company's debt; This ratio can tell you that some companies are bargains while these companies are nearly bankrupt.
As with the Research and Development Percentage - US Stocks, Company Net Income - US Stocks and Company Revenues - US Stocks, this trading object downloads historical data of a fundamental item. It downloads price to sales ratio data for companies listed on US exchanges, including the New York Stock Exchange, NASDAQ and American Stock Exchange.
The data spans from 2000 to present; it is saved in a field called "psr" of the "fundamental" database and can be displayed on charts or used to create composites, trading rules, trading systems or neural network models.
The latest fundamental data related to company's sales can be downloaded using the following trading object Sales, Growth and Estimates. While the latest fundamental ratios, including the price to sales, price to free cash flow, price to earnings and price to book are available here: Fundamental Valuation Ratios for US Stocks.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
