The Price-to-Sales (P/S) ratio measures a company's market value relative to its annual revenue. It is calculated by dividing the company's market capitalisation or share price by its total sales or sales per share. Investors often use the P/S ratio alongside the P/E ratio and Price-to-Book (P/B) ratio to compare companies within the same industry. Since revenue is less affected by accounting adjustments than earnings, the P/S ratio can be useful for evaluating companies with low or negative profits. However, it should always be considered with other financial ratios before making investment decisions.
