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Price-to-Sales Ratio (P/S)
Valuation & Fundamentals
Market capitalization divided by annual revenue.
It is used for companies that are not yet profitable, or whose profits swing too much for a P/E to be useful. Because it ignores profitability entirely, a low-margin business and a high-margin business cannot be compared on this ratio alone.
Example
A company with a market cap of $20 billion and annual revenue of $5 billion has a P/S of 4.
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