why is the price to sales p s ratio useful to investors 
the p s ratio also known as a sales multiple or revenue multiple is a key analysis and valuation tool for investors and analysts the ratio shows how much investors are willing to pay per dollar of sales it can be calculated either by dividing the company s market capitalization by its total sales over a designated period usually twelve months or on a per share basis by dividing the stock price by sales per share like all ratios the p s ratio is most relevant when used to compare companies in the same sector a low ratio may indicate the stock is undervalued while a ratio that is significantly above the average may suggest overvaluation 