PS Value (Pro)

Definition

Click the "Learn More" link below to see how YCharts calculates the PS Value.

The PS Method values stocks by applying a historical average of median Price to Sales Ratios to current trailing 12 months sales numbers. Investors should always check to ensure that they are comfortable with the estimated historical Price to Sales Ratio given information today before investing based on this valuation.

Many investors prefer to use sales numbers to value stocks since they are slightly more difficult than earnings to "edit" using accounting practices. This method tends to overvalue companies that have historically traded at very high PS ratios (usually growth firms), and tends to undervalue companies that historically traded at low PS ratios.

In order to help help investors avoid unreasonable valuations, we have set a maximum Price to Sales multiple of 10, even if the company historically has traded at higher values. If the intelligent investor has good reason to apply a higher multiple, they may choose to do so, but we will not publish numbers that high because they are rarely sustained.

Formula

Value = Price/Sales_3yr x Sales_TTM

Where:
Price/Sales_3yr = The 3 year historical average of annual median Price/Sales Ratios, maximum of 10
Sales_TTM = The trailing 12 month sales per share figures

Related Terms

PE Value (Pro), Price to Sales Ratio, Sales, Valuation (Historical Mult.)