What should be the ideal price to sales ratio in your business? A PSR of less than 0.75 is extremely desirable for non-cyclical and technology firms, although equities with a PSR of 0.75-1.5 are regarded as strong buys. Those having a PSR greater than three are deemed high-risk.
To give you some sense of what the average for the market is, though, many value investors would refer to 20 to 25 as the average P/E ratio range. And again, like golf, the lower the P/E ratio a company has, the better an investment the metric is saying it is.
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.
Aim for a CRR ratio below 1:1, where revenue exceeds costs. Invest in marketing strategies with a proven ROI.
31% COGS from the revenue is considered a good value for a small diner. A high-end restaurant, where the cost can be higher due to expensive food and service, should aim at 20% COGS. 20% revenue is still an excellent number for most businesses out there.
Average revenue of a business is obtained by dividing the total revenue with the total output. The average revenue is similar to the price if a seller sells two units of the same product at the same price.
It also shows the amount that investors are comfortable paying for each dollar of sales per stock. 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.
What is a good price to cash flow ratio? A good price to cash flow ratio is anything below 10. The lower the number, the better the value of the stock. This is because a lower ratio indicates that the company is undervalued with respect to its cash flows.
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.
Apple (AAPL) PE Ratio (TTM) : 38.55 (As of Jan. 14, 2025)
According to Tesla's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 118.273. At the end of 2022 the company had a P/E ratio of 30.6.
Things to remember
Generally a high P/E ratio means that investors are anticipating higher growth in the future. The average market P/E ratio is 20-25 times earnings. Estimated earnings can be used to calculate the projected P/E ratio. Companies that are losing money do not have a P/E ratio.
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.
A general rule of thumb is that a good operating profit margin sits between 10–20%, meaning the business has a profit of 20 cents on each dollar of revenue after operating costs have been deducted. However, this can vary from industry to industry.
P/S ratio as of January 2025 (TTM): 6.90
According to Alphabet (Google)'s latest financial reports and stock price the company's current price-to-sales ratio (TTM) is 7.47. At the end of 2024 the company had a P/S ratio of 5.97.
P/S ratio as of January 2025 (TTM): 9.18
According to Apple's latest financial reports and stock price the company's current price-to-sales ratio (TTM) is 63.0. At the end of 2024 the company had a P/S ratio of 8.86.
According to Toyota's latest financial reports and stock price the company's current price-to-sales ratio (TTM) is 1.02. At the end of 2024 the company had a P/S ratio of 0.7868.
Investments with lower P/S ratios are generally more attractive as this indicates the company is generating more revenue for every dollar investors have put into the company.
The optimum ratio (defined by a minimum secondary flow near the bottom) appears to be slightly above ωt/ωb = -2.1. The measurements show that near optimum the exact pattern of the secondary flow depends strongly on the exact ratio of the rotational speeds ωt/ωb.
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.
The price-to-revenue ratio is an indicator of the value placed on each dollar of a companys revenues. It can be calculated either by dividing the companys market capitalization by its total sales over a 12-month period, or on a per-share basis by dividing the stock price by sales per share for a 12-month period.
Large corporations usually aim for a return on revenue of 10-15%. Small businesses, on the other hand, might be happy with a 5-8% ROR. It is important to remember that there is no one-size-fits-all answer to this question as it depends on the individual company and its goals.
What Ratio Should Businesses Aim For? While there is no universally defined percentage for a "good" Payroll to Revenue Ratio, a commonly cited guideline is that labor costs should ideally account for 15-30% of total revenue.