Price-to-Sales (P/S)

Price-to-Sales (P/S) is a ratio that divides a company's stock price by its annual revenue per share. It tells you how much investors are paying for every dollar of sales the company generates. You'll see P/S used alongside other metrics like P/E ratio when comparing companies, especially useful for evaluating unprofitable businesses where earnings-based metrics fall short. A lower P/S generally suggests a stock is cheaper relative to its sales, though context matters—different industries have different typical ranges. For example, if Company A trades at a P/S of 2 while Company B trades at 5, investors are paying less per sales dollar for Company A, though that doesn't automatically make it the better buy.