Price to sales Ratio (PSR) formula

The Price to Sales Ratio (PSR or the P/S Ratio) in Indonesia called the price ratio this is the ratio of Sales against the financial company's stock price compared with its annual sales. The same as the Price to Earnings Ratio (PER) and Price/Earnings to Growth Ratio (PEG), Price to Sales Ratio is typically also used for stock assessment or commonly referred to with the term Investment Valuation Ratio or ratio of Stock Valuations.


Price to Sales Ratio or price ratio Against Sales valuation ratio is one of the most basic and easy to understand so that it is widely used by investors to make decisions in investing. Investors certainly want to find out how many sales can be generated from the capital they invested. So the Price to Sales Ratio it assesses a company based on actual operations without impact on the accounting adjustments.

How to calculate the Price to Sales Ratio (the ratio of the price Against the sale)?

Here is how to calculate the Price to Sales Ratio (P/S Ratio) with the formula and example case.

Price to Sales Ratio formula

The price ratio Against sales or Price to Sales Ratio is calculated with the share Price per share by Earnings per share.

Price to Sales Ratio = Price per share/Earnings per share

Or

Price to Sales Ratio = market capitalization/sales

Note:

• The price per share can be seen from the sources that contain data of the stock market while the Earnings per share can be calculated with the share of income of the company contained in the financial statements with the total number of outstanding shares.


• Market capitalization can be calculated by multiplying the Price per share by the number of outstanding shares. While corporate earnings can be seen from the financial statements of the company are concerned.

Examples of Cases the calculation of the Price to Sales Ratio

Per 28 March 2018, the price per shares of ABC organization with code issuers ABCO is $ 2,530, while income per-shares (Revenue per Share) was $ 3,331. What is the Price to Sales Ratio (price ratio Against sales) ABC organization?

Note:

The price per share = $ 2,530,-
Earnings per share = $ 3,331,-
Price to Sales Ratio =?



The solution:

Price to Sales Ratio = 2,530/3,331
Price to Sales Ratio = 0.76 times



So price ratio Against sales or Price to Sales Ratio to ABCO per 28 March 2018 is 0.76 times.

On the same date and company i.e. ABC organization on March 28, 2018, we try to use the second formula i.e. a share's market capitalization with sales. The data obtained are as follows:

Market capitalization = 34.34 trillion
sales = 45.21 trillion
Price to Sales Ratio =?



The solution:

(1) Price to Sales Ratio = market capitalization/sales
(2) Price to Sales Ratio = 34.34 trillion/45.21 trillion
(3) Price to Sales Ratio = 0.76 times

So the results of the calculations of the two equations or formulas are the same.

Analysis and assessment of Price to Sales Ratio (the ratio of the price against the sale)

Price ratio against sales or Price to Sales Ratio generally will differ from one type of industry with other industries. Therefore, it is better to use this P/S Ratio companies that operate on the type of industry or sector. The value of low Ratio indicates that the company's stock a "cheaper" from companies that have a high ratio.

If the price ratio against Sales high, it may indicate the concern companies overvalue and investors might be warn to steer clear of the stock. On the other hand, a low Ratio may indicate the company is being underestimate by other investors and may be a good opportunity to buy the shares.