A stock with a price-to-sales below 1 is a good bargain as investors need to pay less than a dollar for a dollar's worth. Thus, a stock with a lower price-to-sales ratio is a more suitable investment than a stock with a high price-to-sales ratio.
Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio. But it doesn't stop there, as different industries can have different average P/E ratios.
What is a Good Price to Book Value Ratio? Value investors often prefer values lower than 1.0, which suggests that an undervalued stock may have been found. The benchmark for certain value investors, however, may frequently be equities with a less strict P/B value of less than 3.0.
While the ideal ratio depends on the company and industry, the P/S ratio is typically good when the value falls between one and two. A price-to-sales ratio with a value less than one is better.
Generally, a smaller price-to-sales (P/S) ratio (i.e. less than 1.0) is usually thought to be a better investment since the investor is paying less for each unit of sales. However, sales do not reveal the whole picture, as the company may be unprofitable and have a low P/S ratio.
Most men will have a PSA level less than 3 nanograms/mL. About 3 in 4 men with a raised PSA level (3 nanograms/mL or higher) will not have cancer. Around 15% of men with a normal PSA do have cancer.
Buffett's Strategy
Warren Buffett, the greatest value investor of this century, now tends to buy stocks with a P/B ratio of around 1.3.
And so generally speaking, the lower the P/E ratio is, the better it is for both the business and potential investors. The metric is a company's stock price divided by its earnings per share. You shouldn't compare P/E ratios of different kinds of companies, like a tech company and a consumer staple company.
The corporations are formed with a face value of INR 10, but most have a face value of INR 100 or INR 1. SEBI, which governs the requirements for listing a public limited company on a stock exchange, has established a minimum face value of INR 1.
According to Tesla's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 115.76. At the end of 2022 the company had a P/E ratio of 30.6.
Apple (AAPL) PE Ratio (TTM) : 38.55 (As of Jan. 14, 2025)
Very low vs very high PE ratios
It is arguable that a PE of five or less is not a remarkable bargain. While it might look as if the company's prospects are being viewed too negatively, it is not a bad rule of thumb to filter out companies with a PE below this level.
As far as Nifty is concerned, it has traded in a PE range of 10 to 30 historically. Average PE of Nifty in the last 20 years was around 20. * So PEs below 20 may provide good investment opportunities; lower the PE below 20, more attractive the investment potential.
The justified P/S ratio is calculated as the price-to-sales ratio based on the Gordon Growth Model. Thus, it is the price-to-sales ratio based on the company's fundamentals rather than . Here, g is the sustainable growth rate as defined below and r is the required rate of return.
P/S ratio as of January 2025 (TTM): 2.52
According to Pfizer's latest financial reports and stock price the company's current price-to-sales ratio (TTM) is 1.64. At the end of 2024 the company had a P/S ratio of 2.74.
You can look at industry averages for key financial metrics such as revenue growth, profit margins, and return on equity. If the company consistently outperforms these averages, it might be a strong contender.
One of the most important ratios for investors to understand is return on equity, or the return a company generates on its shareholders' capital. In one sense, it's a measure of how good a company is at turning its shareholders' money into more money.
If the relative P/E measure is 100% or more, this tells investors that the current P/E has reached or surpassed the past value.
The Pareto principle or the 80/20 Rule - the fact that 20% of efforts cause 80% of the results across many areas of our life - is a critical mental model that has driven Warren Buffett's success.
Traditionally, any value under 1.0 is considered desirable for value investors, indicating an undervalued stock may have been identified. However, some value investors may often consider stocks with a less stringent P/B value of less than 3.0 as their benchmark.
As we suspected, our examination of Berkshire Hathaway's analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E.
While PS ratios are not a perfect indicator of a company's value, they can be a useful tool for identifying potential risks. By avoiding companies with PS ratios above 18X, you can reduce your chances of investing in overvalued stocks that could experience significant price declines.
In general: For men in their 40s and 50s: A PSA score greater than 2.5 ng/ml is considered abnormal. The median PSA for this age range is 0.6 to 0.7 ng/ml. For men in their 60s: A PSA score greater than 4.0 ng/ml is considered abnormal.
The required number of points, and therefore trophies, per level up increases with every 100 levels. The highest available to reach is level 999.