Price to Sales (P/S) Ratio
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P/S = Market Price per Share / Sales per Share
P/S Positives
- Sales can be more difficult for management to manipulate than earnings or book value.
- While earnings can be negative, sales are never negative.
- Sales can be more consistent than earnings.
- P/S can be useful for analyzing companies with no earnings, are cyclical, or have reached maturity.
- Stock return trends can be analyzed within the context of differences in P/S values.
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