Price–sales ratio

The price to sales ratio ( PSR ) is a public figure. It sets the current market capitalization of a company in relation to its (annual ) sales. Thus, the term is related to the price-earnings ratio (PER ), which considers the ratio of price to earnings of the company.

The PSR can be as price-earnings ratios for companies with cyclic fluctuating operating margin a more appropriate evaluation criterion. In turnaround situations and in young companies that are still in the phase of start-up costs, it can, in contrast to KGV provide a meaningful statement.

In general, however, the KGV meaningful, since the PSR ignores the profitability of the company. For example, a stock with PSR 2 cheaper than a stock with PSR 1 if the first company is able to permanently earn more than twice as high a return on sales. An absolute scale, which PSRs as high and which is considered to be low, does not exist.

At the time of the New Economy boom PSRs were used to justify the exorbitant reviews of often unprofitable companies. After the bursting of the speculative bubble PSRs lost as a measure of popularity. However, it is still a key criterion in the popular "Exchange pastor " Uwe Lang in the stock valuation.