Compares a company's stock price to its revenues.
Formula: P/S = Price / Revenue Per Share
How to read it: < 1 = cheap relative to sales · 1–2 = average · > 2 = expensive by generic standards. High-margin businesses such as software routinely trade at 5–15× sales, so compare within a sector.
Crucial for evaluating young, high-growth companies that are not yet profitable but have strong top-line revenue growth.