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.
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🕒 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!
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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.
Do you prefer P/S or P/E ratio when evaluating a stock?
Normally I look at P/E and P/B ratios
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!
Glad I found this channel. Awesome and easy to understand.
Can you pls clarify. The math in the vid suggests 10B/2.5B = 5x. Was that supposed to be 4x? Thanks! Great vids BTW
Yes you are correct! That was a mistake on my part
Ok great thx for clarifying
This is a really great overview! Very helpful metric to look at for analyzing and company.
Clear short and to the point, love it!
This is an important metric amongst others for deciding on whether you want to invest in a company. Great share.
Love the easy simple explanation! Thanks!
Great breakdown as always. Thanks for sharing this information 😀
A great metric to look into, if the business is yet to make profits! Thanks for sharing!
I use the P/E Ratio, but both are great! I like the animations you use!
Important metric to look at, nicely explained!
Needed to see this, thanks Ry!
Thanks for breaking this down. I have not used the PS ratio but now I have an understanding of it. Nice video. 👍
Thanks! I’m happy you enjoyed
I'm more of a P/E guy but P/S can be helpful also sometimes. Awesome explanation!
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
Beautiful video as always sir. :)
Super informative video, thank you very much
Really well explained! Great video as always.
Much appreciated!
Great video very informative 👏
Thanks for sharing another valuation metric!
My pleasure!
multiplication error at 3:32 mark. P/S TTM should be 4x.
Oh, yeah you are right! Thanks for pointing it out!
Thank you for this. I thought the dam was included in the num, but it was just an error.
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.
Very well explained, thanks for sharing! Thumbs up
Thank you!
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.
Hello Rynance, your youtube videos are very insightful and fun to watch. I hope you make more new video contents. Thank you.
Ola, Greetings from a new friend living in POrtugal 👍 29
Big like Ry 👍
Thanks!
I started to watch your videos I loved . You have my subscribe. Thanks a lot🙏🙏🙏
Let's talk ✍️✍️☝️☝️✅
Great video! So informative.
Also keep making videos!!! Your channel is growing!!!!
Thanks brother I appreciate your time greatly
Let's talk ✍️✍️☝️☝️✅
Thank you very much - from India 🇮🇳
nice videa, please tell me what best P/S ratio number ? below 1, or 0,5 or ?
Very useful and educational video.
Thanks!
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.
if the revenue & profits are inclining but
p.s.r is declining with the stockprice & market cap. Thats when psr becomes key. Thats gold!
Nice
Great exercise and valuable information.
Let's talk ✍️✍️☝️☝️✅
Thanks for the explanation
Absolutely!
10/2.5=4
Tks for good information
Great video, awesome information provided and the voice of an angel loll. Like #26
Lol thank you!
very nice video and I liked it and I am sube🎉
Thanks!
Shouldn't Riley's Robotics PS on TTM be 4 instead of 5 ?? -- 10B/2.5B = 4
That's correct! I made a division error there
@@Rynance wow, I thought I was losing my mind. Thanks for mentioning this.
Great explanation. Thumbs up from a fellow creator 😅
Please make more videos 🙃
What if the p/s ratio is 0.9? Very cheap?
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.
I agree. Stick to what you know!
3:50 Trailing Price to sales is 4 not 5.
is price to sales same as price/revenue?
Let's talk ✍️✍️☝️☝️✅
Why no videos now?
why did you stop making videos?
I'm pretty sure 4 times 2.5 is 10... or am I missing something?
10/2.5 =4
10/2.5 = ???
3:35 wouldn’t it be a 4X not 5x
P/S TTM... 10/2.5=4X....
This is clearly 4 times instead of 5 (p/s ttm)
10 divided by 2.5 is 4
Let's talk ✍️✍️☝️☝️✅
i thought 10 divided by 2.5 was 4 .....but thats just me
Thanks for sharing. I prefer per share basis but sometimes shares outstanding is not easy to tabulate thus the sensitivity
Makes sense! Do what works for you!