The price-to-sales (P/S) ratio is a valuation ratio that compares a company’s stock price to its revenues. The price-to-sales (P/S) ratio shows how much investors are willing to pay per unit of sales for a stock.
The P/S ratio is calculated by dividing the stock price by the underlying company's sales per share. A low ratio could imply the stock is undervalued, while a ratio that is higher-than-average could indicate that the stock is overvalued.
One of the downsides of the P/S ratio is that it doesn’t take into account whether the company makes any earnings or whether it will ever make earnings.