Price to Sales Ratio (PS)
Calculate the price to sales ratio (P/S), a valuation ratio that compares a company’s market capitalization to its total revenue.
The price to sales ratio is particularly useful for valuing companies that are not yet profitable (and therefore have no meaningful P/E ratio), since revenue is typically positive even when earnings are not, and is less susceptible to accounting distortions than earnings-based multiples. It is, however, less informative than earnings- or cash-flow-based multiples for mature, profitable companies since it ignores profitability and cost structure entirely.
The formula is as follows:
\[\text{Price to Sales Ratio} = \text{Market Cap} / \text{Revenue}\]Also known as: P/S ratio, sales multiple.
Price to Sales Ratio (PS) in Python
get_price_to_sales_ratio is part of the Ratios module of the open-source Finance Toolkit. Install it with:
pip install financetoolkit -U
Then call get_price_to_sales_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(["AAPL", "TSLA"], api_key="FINANCIAL_MODELING_PREP_KEY")
price_to_sales_ratio = toolkit.ratios.get_price_to_sales_ratio()
Parameters
get_price_to_sales_ratio accepts the following parameters:
- show_daily (bool, optional): Whether to show daily data. Defaults to False.
- diluted (bool, optional): Whether to use diluted shares in the calculation. Defaults to True.
- rounding (int, optional): The number of decimals to round the results to. Defaults to 4.
- growth (bool, optional): Whether to calculate the growth of the ratios. Defaults to False.
- lag (int | str, optional): The lag to use for the growth calculation. Defaults to 1.
- standardize (bool, optional): Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False.
- trailing (int): Defines whether to select a trailing period. E.g. when selecting 4 with quarterly data, the TTM is calculated.