Price-to-Sales (P/S)

Price-to-Sales (P/S) is a ratio that compares a company's stock price to its annual revenue per share. It tells you how many dollars investors are willing to pay for every dollar of sales the company generates. You'll see P/S used alongside other metrics like P/E ratio when evaluating whether a stock is cheap or expensive. It matters because it's harder to manipulate than profit-based metrics—a company can't easily fake revenue the way it might massage earnings. For example, if Company A trades at a P/S of 2, investors pay $2 for every $1 in annual sales, while Company B at P/S of 0.5 costs half as much per sales dollar. Lower isn't always better, though—it depends on the industry and growth prospects.