What is the price-to-sales ratio?

The price-to-sales ratio was feted in the mid 1990s, and vilified after the dotcom crash. Tim Bennett explains what it is, how it works and when investors should use it.

By Tim Bennett
published

Sometimes called the 'king of ratios', the price-to-sales ratio is one of the most useful ways to tell if a share is cheap or expensive, and is a good predictor of future share-price performance. Tim Bennett explains what it is, how you calculate it, and when you should use it - and points out some of its downsides.

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The price-to-book ratio

The EV/EBITDA ratio

What does a PEG ratio tell you?

What is Tobin's Q ratio?

See also MoneyWeek's Financial glossary.

Tim Bennett

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.

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