Encyclopedia of Investment Terminology

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Price Sales Ratio (PS ratio)

The price sales ratio, or PS ratio, is the market capitalization of the company divided by its revenue from the previous fiscal year. For instance, if the market cap of a company is $40 million and its revenue was $12 million then the PS ratio will be 3.33. It can also be measured by the stock price divided by the revenue for each share. The lower the PS ratio, the better the buy.

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