Price to Sales Ratio Explained | Finance in 5 Minutes!

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  • čas přidán 4. 07. 2024
  • 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 CZcams 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.

Komentáře • 84

  • @Rynance
    @Rynance  Před 3 lety +6

    Do you prefer P/S or P/E ratio when evaluating a stock?

  • @Adrian-cn5rk
    @Adrian-cn5rk Před 2 měsíci +3

    I just found this channel, binged all of the videos and came to realize you no longer post. What a shame, you made the content very easy to digest. Thank you for your hard work!

  • @HonestOne
    @HonestOne Před 18 dny

    Glad I found this channel. Awesome and easy to understand.

  • @peteludwik4138
    @peteludwik4138 Před 2 lety +8

    Can you pls clarify. The math in the vid suggests 10B/2.5B = 5x. Was that supposed to be 4x? Thanks! Great vids BTW

    • @Rynance
      @Rynance  Před 2 lety +3

      Yes you are correct! That was a mistake on my part

    • @peteludwik4138
      @peteludwik4138 Před 2 lety +1

      Ok great thx for clarifying

  • @stephen-finance
    @stephen-finance Před 2 lety +4

    This is a really great overview! Very helpful metric to look at for analyzing and company.

  • @CanadianDividendInvesting

    Clear short and to the point, love it!

  • @DisruptiveWealthCreation
    @DisruptiveWealthCreation Před 3 lety +1

    This is an important metric amongst others for deciding on whether you want to invest in a company. Great share.

  • @FluentinFinance
    @FluentinFinance Před 3 lety

    Love the easy simple explanation! Thanks!

  • @GrowingFinancially
    @GrowingFinancially Před 3 lety +3

    Great breakdown as always. Thanks for sharing this information 😀

  • @DandyFinance
    @DandyFinance Před 3 lety +1

    A great metric to look into, if the business is yet to make profits! Thanks for sharing!

  • @financewithian2052
    @financewithian2052 Před 3 lety +1

    I use the P/E Ratio, but both are great! I like the animations you use!

  • @ModestMillennial
    @ModestMillennial Před 3 lety +1

    Important metric to look at, nicely explained!

  • @WaysToWealth
    @WaysToWealth Před 3 lety

    Needed to see this, thanks Ry!

  • @incomestockinvesting5626
    @incomestockinvesting5626 Před 3 lety +1

    Thanks for breaking this down. I have not used the PS ratio but now I have an understanding of it. Nice video. 👍

    • @Rynance
      @Rynance  Před 3 lety

      Thanks! I’m happy you enjoyed

  • @FanaticalFinance
    @FanaticalFinance Před 3 lety

    I'm more of a P/E guy but P/S can be helpful also sometimes. Awesome explanation!

  • @Benje
    @Benje Před 3 lety +1

    Sick vid as always bro, I'm a fan of the P/E ratio but it is never bad to take a look at the P/S ratio in some circumstances

  • @YasinNabi
    @YasinNabi Před 3 lety +1

    Beautiful video as always sir. :)

  • @benwirtz4739
    @benwirtz4739 Před 3 měsíci

    Super informative video, thank you very much

  • @TylerSinden
    @TylerSinden Před 3 lety +1

    Really well explained! Great video as always.

  • @financialempowermentwithbr8813

    Great video very informative 👏

  • @DanishGhaziCPA
    @DanishGhaziCPA Před 3 lety +2

    Thanks for sharing another valuation metric!

  • @christopherjones3767
    @christopherjones3767 Před 3 lety +5

    multiplication error at 3:32 mark. P/S TTM should be 4x.

    • @Rynance
      @Rynance  Před 3 lety +1

      Oh, yeah you are right! Thanks for pointing it out!

    • @daveppl9138
      @daveppl9138 Před rokem

      Thank you for this. I thought the dam was included in the num, but it was just an error.

  • @dsgnrkevz
    @dsgnrkevz Před rokem

    You should create a course. I really like the way you teach and it's easier to understand compared to other yt channel. I'll definitely gonna buy your course if you have one.

  • @investingwiththeraufbros7884

    Very well explained, thanks for sharing! Thumbs up

  • @aleksandrabybina309
    @aleksandrabybina309 Před 2 lety

    Hi. Your explanation is so good! Can you please make a video about dividend discount model en dividend cashflow model? I am struggling to understand them.

  • @Hanzothedach1323
    @Hanzothedach1323 Před 4 měsíci

    Hello Rynance, your youtube videos are very insightful and fun to watch. I hope you make more new video contents. Thank you.

  • @upliftandbealive6547
    @upliftandbealive6547 Před 3 lety +1

    Ola, Greetings from a new friend living in POrtugal 👍 29

  • @thestockexplorer
    @thestockexplorer Před 3 lety +1

    Big like Ry 👍

  • @ojingaj30
    @ojingaj30 Před 5 měsíci

    Thanks!

  • @la_uruguacha
    @la_uruguacha Před rokem

    I started to watch your videos I loved . You have my subscribe. Thanks a lot🙏🙏🙏

    • @Rynance420
      @Rynance420 Před rokem

      Let's talk ✍️✍️☝️☝️✅

  • @thefungiblemillennial-fina2207

    Great video! So informative.

  • @nicholassheppard9311
    @nicholassheppard9311 Před rokem

    Thanks brother I appreciate your time greatly

    • @Rynance420
      @Rynance420 Před rokem

      Let's talk ✍️✍️☝️☝️✅

  • @santhoshilla8416
    @santhoshilla8416 Před 3 měsíci

    Thank you very much - from India 🇮🇳

  • @br2u
    @br2u Před rokem

    nice videa, please tell me what best P/S ratio number ? below 1, or 0,5 or ?

  • @ryminvesting6554
    @ryminvesting6554 Před 3 lety +1

    Very useful and educational video.

  • @AchillesFinancial
    @AchillesFinancial Před 3 lety +1

    I find this to be a super important metric that no one was paying attention to in 2020 lol. Between this and their PEG ratio, I get most of my opinion on if a stock is overvalued.

    • @meghbhatt
      @meghbhatt Před rokem

      if the revenue & profits are inclining but
      p.s.r is declining with the stockprice & market cap. Thats when psr becomes key. Thats gold!

  • @mscnakshatra1947
    @mscnakshatra1947 Před 2 lety

    Nice

  • @maynardsmith413
    @maynardsmith413 Před rokem

    Great exercise and valuable information.

    • @Rynance420
      @Rynance420 Před rokem

      Let's talk ✍️✍️☝️☝️✅

  • @nooobest
    @nooobest Před 3 lety +1

    Thanks for the explanation

  • @glorykim3257
    @glorykim3257 Před rokem

    10/2.5=4
    Tks for good information

  • @brickinvesting
    @brickinvesting Před 3 lety +1

    Great video, awesome information provided and the voice of an angel loll. Like #26

  • @AdamLoL
    @AdamLoL Před 3 lety +1

    very nice video and I liked it and I am sube🎉

  • @amdistant5547
    @amdistant5547 Před 2 lety +2

    Shouldn't Riley's Robotics PS on TTM be 4 instead of 5 ?? -- 10B/2.5B = 4

    • @Rynance
      @Rynance  Před 2 lety +2

      That's correct! I made a division error there

    • @basenvy
      @basenvy Před 5 měsíci

      @@Rynance wow, I thought I was losing my mind. Thanks for mentioning this.

  • @imethan-youtubetips7141
    @imethan-youtubetips7141 Před 3 lety +1

    Great explanation. Thumbs up from a fellow creator 😅

  • @DogHonest
    @DogHonest Před 2 lety

    Please make more videos 🙃

  • @rlin3020
    @rlin3020 Před 3 měsíci

    What if the p/s ratio is 0.9? Very cheap?

  • @NatePolmateer
    @NatePolmateer Před 3 lety +1

    I use P/E ratio. I think you need to stick to what you are comfortable with. Otherwise, there are so many areas you can look at for a company and you could get lost in it.

    • @Rynance
      @Rynance  Před 3 lety +2

      I agree. Stick to what you know!

  • @CatholicSoldierX
    @CatholicSoldierX Před 2 lety +1

    3:50 Trailing Price to sales is 4 not 5.

  • @lxaccaxl
    @lxaccaxl Před 2 lety

    is price to sales same as price/revenue?

    • @Rynance420
      @Rynance420 Před rokem

      Let's talk ✍️✍️☝️☝️✅

  • @prathikkotian3389
    @prathikkotian3389 Před 16 dny

    Why no videos now?

  • @ramzh9315
    @ramzh9315 Před 12 dny

    why did you stop making videos?

  • @helbrassen4576
    @helbrassen4576 Před rokem

    I'm pretty sure 4 times 2.5 is 10... or am I missing something?

  • @leekinboo
    @leekinboo Před 4 měsíci

    10/2.5 =4

  • @peruvaikala7806
    @peruvaikala7806 Před 2 lety

    10/2.5 = ???

  • @sonny5982
    @sonny5982 Před 7 měsíci

    3:35 wouldn’t it be a 4X not 5x

  • @ryanchang5021
    @ryanchang5021 Před 4 měsíci

    P/S TTM... 10/2.5=4X....

  • @ailinxu
    @ailinxu Před rokem

    This is clearly 4 times instead of 5 (p/s ttm)

  • @KNLP23
    @KNLP23 Před rokem

    10 divided by 2.5 is 4

    • @Rynance420
      @Rynance420 Před rokem

      Let's talk ✍️✍️☝️☝️✅

  • @hevmode8261
    @hevmode8261 Před rokem

    i thought 10 divided by 2.5 was 4 .....but thats just me

  • @ChoogyNet
    @ChoogyNet Před 3 lety +1

    Thanks for sharing. I prefer per share basis but sometimes shares outstanding is not easy to tabulate thus the sensitivity

    • @Rynance
      @Rynance  Před 3 lety +1

      Makes sense! Do what works for you!