P/S ratio (price-to-sales)

Example

Say company XYZ has 100 million shares at $30, a market capitalization of $3 billion, and $600 million of revenue over the last 12 months, but still loses money. Its P/S ratio is $3 billion ÷ $600 million = 5, so investors pay $5 for each dollar of yearly sales. A rival at the same P/S that keeps 20 cents of profit per sales dollar is a very different business.

Hypothetical numbers, for illustration only.