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The price-sales ratio, PSR or P/S ratio is the ratio of the company’s stock price to annual sales per share.
The PSR is typically used to compare unprofitable companies (for which there is no P/E ratio) in the same sector. PSR comparisons between companies from different industries are not very useful. A lower PSR indicates a stock generates more sales per unit purchased and may be better priced, but since profit is not taken into account this has major weaknesses. Unless otherwise specified, a PSR is based on sales from the most recent four quarters.
Related Links
Wikipedia’s article on PSR
Investopedia’s article on PSR
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