Price-to-Sales (P/S) Ratio Calculator
Written by Thierno Sadou Diallo, formula verified per our methodology • Last checked on 9/10/2026
The price-to-sales (P/S) ratio is calculated with share price ÷ revenue per share. For a share price of €150 and revenue per share of €50, the P/S ratio is 3.
Explanation
The price-to-sales (P/S) ratio measures how much investors are willing to pay for each euro of revenue a company generates, by dividing the share price by its revenue per share. Its main advantage over an earnings-based valuation metric like the price-to-earnings ratio, the best-known one (and a natural companion to the dividend yield many investors also check), is that it stays calculable and meaningful even for a company with no positive earnings: many young growth companies or biotechs in development show solid revenue but a negative net result (heavy investment, R&D), which makes their P/E unusable since a negative or zero earnings-per-share produces a meaningless ratio. P/S then lets you compare these companies' valuations against each other, or against more mature companies in the same sector, without that bias. A low P/S (below 1, for example) can signal an undervalued stock relative to its business activity, but this ratio completely ignores profitability: a company can show a very low P/S simply because it generates a lot of revenue for very thin margins, which doesn't necessarily make it a good deal. As with any valuation ratio, comparison only makes sense between companies in the same sector, since normal P/S levels vary widely with each industry's typical capital intensity and margins.
Example: a €150 share price, €50 revenue per share
Inputs
Share price: €150. Revenue per share: €50.
Calculation
P/S ratio = 150 ÷ 50 = 3.
Result
Investors are paying €3 for every euro of revenue this company generates.
Frequently asked questions
Why use P/S instead of P/E?
P/S stays calculable even when earnings per share are negative or near zero, a common case for growth companies that heavily reinvest their revenue rather than generating immediate profit. P/E becomes unusable or misleading in that case, while revenue remains a positive, meaningful figure.
Does a low P/S always mean an undervalued stock?
Not necessarily: a low P/S can also reflect a very low-margin business (distribution, trading), where generating a lot of revenue doesn't translate into significant profit. A company's P/S should always be compared to others in the same industry, never to a universal threshold, and cross-checked with profitability metrics like the margin implied by our break-even point calculator.
Which sectors typically show a high or low P/S?
High-margin, fast-growing sectors (software, technology) often show high P/S ratios, as investors value expected future profitability more than current revenue. Conversely, low-margin, high-volume sectors (retail, consumer staples) generally show much lower P/S ratios, reflecting structurally thin margins.