The P/S ratio is calculated by dividing the company’s fully diluted market capitalization by its total sales.
The ratio was first proposed in the 1980s as a way to evaluate high-growth-potential, high-R&D companies and has been widely used for such companies ever since then. These companies often have no positive earnings, so one can use P/S instead of P/E.
The PS ratio helps investors determine the market value of a stock as compared to the revenues. A high PS without significant Sales Growth could mean that a stock's price is high relative to sales and possibly overvalued. Conversely, a low PS with high Sales Growth might indicate that the current stock price is low.
Formula
(SharesFD * Price) / Sales
Availability
These ratios combine data from from line item filings and factors that use prices (click here for the line-item reference). Which price is used in the calculation depends on the period. The latest close price is used for ratios that involve the latest financials, like the most recent quarter or the latest trailing twelve fiscal months (TTM). For ratios that involve older financials, like the quarter one year ago, or the TTM one year ago, the price used for the calculation is the average price during the following quarter.
Quarterly values from Income & Cashflow statements are annualized to make the resulting factor more readily comparable with 12-month factors. The annualization is done by multiplying the quarterly figures by approximately 4 (depends on the actual number of days in the period).
You can either use a prebuilt ratio or use the function to define your own.
Function
RatioName(offset,type)
offset: 0-25 (for interim) 0-10 (for annual)
type: QTR (for interim), ANN (for annual), TTM (for trailing twelve months)
For example to screen for stocks whose P/E today is less than their P/E from their previous fiscal 4 quarters enter:
PEExclXor(0,TTM) < PEExclXor(4,TTM)
The above can also be done using prebuilt ratios:
PEExclXorTTM < PEExclXorPTM
Prebuilt Ratios
Prebuilt ratios are available for these periods:
| Period | Description | Price | Line Item |
|---|---|---|---|
| Q | Recent Quarter | Close(0) | (0, QTR) |
| PQ | Prior Quarter | Avg nextQ | (1, QTR) |
| PYQ | Prior Year Quarter | Avg nextQ | (4, QTR) |
| TTM | Trailing Twelve Months | Close(0) | (0, TTM) |
| PTM | Prior TTM | Avg nextQ | (4, TTM) ** |
| A | Recent Annual | Avg nextQ | (0, ANN) |
| PY | Prior Year | Avg nextQ | (1, ANN) |
** PTM offset is 4 , not 1, since it uses interim periods