Stock price-to-sales ratio (Price-to-Sales, PS) is an important financial indicator, which reflects the ratio between the total market value of the enterprise and the main business income.Among them, the main business income is the most important source of income for an enterprise. The more sales income a company has, the stronger the company’s competitiveness is. The higher the stock price-to-sales ratio, the greater the investment value of the company’s stock.
What is the stock price-to-sales ratio?
Dynamic price-to-sales ratio (Dynamic Price-to-Sales, DPs) is based on the stock price-to-sales ratio, taking into account changes in stock prices and the impact of time. The dynamic price-to-sales ratio is calculated by dividing the current stock price by sales per share over the past year and then multiplying the result by 100%. Therefore, the dynamic price-to-sales ratio reflects the stock market’s expectations of the company’s future growth.
The advantages and disadvantages of stock price-to-sales ratio and dynamic price-to-sales ratio are different. The advantage of the stock price-to-sales ratio is that it is easy to use and can quickly reflect the stock investment value of the company. The disadvantage is that it does not take into account the business risk and market competition conditions of the enterprise, as well as the fluctuation factors of the stock price. The advantage of the dynamic price-to-sales ratio is that it can more accurately reflect the market competitiveness and growth potential of the company. The disadvantage is that it needs to consider multiple factors and the calculation is more complicated.
In practical applications, investors can choose appropriate financial indicators for analysis and valuation according to their own investment style and judgment on the company’s prospects. Generally speaking, for high-growth companies, dynamic price-to-sales ratios can be used for valuation, while for mature and stable companies, stock price-to-sales ratios can be used for valuation. At the same time, investors also need to analyze multiple factors such as the company’s financial status, industry prospects, and market conditions to draw more accurate valuation conclusions.