Price-to-Sales (P/S)

P/S = market value of equity / total sales = market price per share / sales per share

Advantages:
· Always positive, even for distressed firms
· Less manipulated
· Less volatile than P/E
· Useful for start ups and in mature or cyclical industries
· Studies has indicated low ratio outperform high ratio

Disadvantage:
· High sales growth does not guarantee high profit growth
· Does not reflect differing cost structures
· Revenue recognition can distort sales.