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Price to Sales Ratio
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jeremyow
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07-Jun-2009 12:19
Yells: "Passionate business investor" |
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Yes, to calculate price to sales ratio, divide the current market cap (number of outstanding ordinary shares X current stock price) by total revenue for the last 12 months. Price to sales ratio = current market cap / total revenue (for last 12 months) Price to sales ratio may differ with different industries (since it depends on revenue made which can differ very much among different industries). So, one should compare only price to sales ratio of companies in the same industry within the same country (to also avoid the fluctuating currency conversion rates affecting the conversion of foreign company's revenue into Singapore dollars). Another thing to note is that price to sales ratio only takes into account the total revenue of the company compared to it's stock price. It does not paint a complete picture to compare prospects between different companies. So what if a company has a greater revenue and cheaper stock price (ie. a smaller price to sales ratio) than another company. The other company which is making lesser revenue but has a higher gross margin and net margin, and cashflow from operating activities may be considered performing better since it can reduce it's total cost of operations and thus getting higher net earnings. Another thing to note is whether the revenue has been growing at high compounded rate through the years. A significantly high or low revenue in the current year may distort the price to sales ratio for the year. One should then investigate carefully the reasons for a significantly high revenue or low revenue and decide whether this will be sustained in subsequent years. Of course, one hopes that a current high revenue will continue going higher, and a current dip in revenue will pick up again subsequently. Thus, individual financial ratios taken alone based on only one year of assessment may not paint a complete picture of the economics of a business. The more thorough the comparison between companies (taking into account many considerations together), the better the assessment when comparing which company is performing better. |
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windel
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05-Jun-2009 19:26
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anyone knows?? |
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windel
Member |
03-Jun-2009 21:59
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Alright,so for Price to Sales ratio Do I take the CURRENT MARKET CAP (divide) (total revenue for last 12 months)? any help wld be much appreciated! |
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wongmx6
Veteran |
26-May-2009 22:43
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To round up the answer in unit of million. |
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windel
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26-May-2009 18:44
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Why did you divide it by 100? I did some research on the internet and all sites state that Market cap = (number of outstanding shares) x (current stock price) Could you clarify please? |
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wongmx6
Veteran |
24-May-2009 17:32
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Market Capitalisation (Million) = (share price X Ordinary shares in issue) / 100. You can get it at the company Financial Statement.Market Capitalisation (Million) for any companies under STI is reflected at Business Times newspaper. |
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windel
Member |
24-May-2009 14:01
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Hmm.. anyone knows? |
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windel
Member |
21-May-2009 01:17
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Hi all, I want to find out the Price to Sales ratio of this company -- Alibaba.com (http://www.google.com/finance?q=HKG%3A1688). I understand that in order to calculate the price to sales ratio, you have to divide the market cap by total revenues. Unfortunately, the company only releases their total revenue (correct me if I am wrong please) for the last 12 months at the end of the year. Having said that, how should I go about to calculate the price to sales ratio? And how can I convert the ratio so that I can compare it with other US stocks? Forgive my mathematical retardedness here please..... Any help would be much appreciated! Regards, Windel |
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