Price to Sales Ratio Explained | Finance in 5 Minutes!
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3 سال پیش
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Price to sales ratio, also
Price to sales ratio, also known as PS ratio in the stock market, is simply explained in this 5 minute video! You'll learn the formula and how to calculate the price sales ratio, the difference between forward and trailing (TTM) price-sales ratio, and some limitations when using the P/S metric!
The price to sales ratio is a valuation metric that compares the stocks current price, to their sales numbers. The calculation for this ratio can be found by dividing the stock’s market cap, by their yearly revenue. It tells you how much you are paying in stock price, for each dollar of revenue the company generates. Investors use price to sales to judge if the company is over or undervalued, relative that company’s peers.
This ratio can be especially useful when attempting to value a stock that is not currently profitable, or only slightly profitable, as you only need to look at their current revenue amounts. Some investors even prefer price to sales over other valuation ratios like the PE ratio.
As with most valuation ratios, there are 2 different time frames that you can look at, trailing and forward. The trailing price to sales ratio would rely on financial information that has already been reported, and is using data from the last 1 year of operations. This is usually written as P/S (TTM) in which the TTM part means trailing 12 months. A forward price to sales ratio is referencing analyst’s expectations for the coming year. A forward PS ratio are based on estimates but can be used as a guide for what to expect.
This video is part of my Stock Market Basics playlist.
🔔 Subscribe for more videos! @rynance
🕒 Time Stamps!
00:00 Intro
00:22 Price to Sales Ratio Explained
00:44 Comparison to PE Ratio
01:26 PS Ratio Calculations
02:40 Trailing vs Forward
03:12 Example
04:15 Limitations
05:28 Thanks for Watching!
💻 Check out the Stock Market Basics Playlist for more videos like this!
💬 Drop me a comment if you have a question!
👍 Smash like for the YouTube algorithm!
Disclaimer
This channel is for entertainment purposes only and is not investment advice. All videos published on this channel are informational in nature and are not intended to give advice or recommendations about any particular security or investment. Before making any investment decisions, I would recommend you to speak to a financial professional that is qualified to provide advice.
The price to sales ratio is a valuation metric that compares the stocks current price, to their sales numbers. The calculation for this ratio can be found by dividing the stock’s market cap, by their yearly revenue. It tells you how much you are paying in stock price, for each dollar of revenue the company generates. Investors use price to sales to judge if the company is over or undervalued, relative that company’s peers.
This ratio can be especially useful when attempting to value a stock that is not currently profitable, or only slightly profitable, as you only need to look at their current revenue amounts. Some investors even prefer price to sales over other valuation ratios like the PE ratio.
As with most valuation ratios, there are 2 different time frames that you can look at, trailing and forward. The trailing price to sales ratio would rely on financial information that has already been reported, and is using data from the last 1 year of operations. This is usually written as P/S (TTM) in which the TTM part means trailing 12 months. A forward price to sales ratio is referencing analyst’s expectations for the coming year. A forward PS ratio are based on estimates but can be used as a guide for what to expect.
This video is part of my Stock Market Basics playlist.
🔔 Subscribe for more videos! @rynance
🕒 Time Stamps!
00:00 Intro
00:22 Price to Sales Ratio Explained
00:44 Comparison to PE Ratio
01:26 PS Ratio Calculations
02:40 Trailing vs Forward
03:12 Example
04:15 Limitations
05:28 Thanks for Watching!
💻 Check out the Stock Market Basics Playlist for more videos like this!
💬 Drop me a comment if you have a question!
👍 Smash like for the YouTube algorithm!
Disclaimer
This channel is for entertainment purposes only and is not investment advice. All videos published on this channel are informational in nature and are not intended to give advice or recommendations about any particular security or investment. Before making any investment decisions, I would recommend you to speak to a financial professional that is qualified to provide advice.
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