ValuratorExplore Company Valuations

Price-to-Sales (P/S)

For informational and educational purposes only • Not investment advice.

Compare P/S valuations across companies

Nvidia
Estimated Fair Value$204.11
Current Price$229.28
Valuation Gap-11.0%
Historical Median P/S16.30x
Current P/S18.31x
Detailed valuation
Apple
Estimated Fair Value$205.99
Current Price$336.64
Valuation Gap-38.8%
Historical Median P/S6.48x
Current P/S10.59x
Detailed valuation
Alphabet
Estimated Fair Value$228.80
Current Price$351.66
Valuation Gap-34.9%
Historical Median P/S6.22x
Current P/S9.56x
Detailed valuation
Microsoft
Estimated Fair Value$453.50
Current Price$535.07
Valuation Gap-15.2%
Historical Median P/S10.15x
Current P/S11.98x
Detailed valuation
Selected P/S

What is Price-to-Sales (P/S) Valuation?

Price-to-Sales (P/S) Valuation estimates a company's Fair Value based on its Revenue and the P/S multiple applied to that Revenue.

The P/S ratio compares a company's Market Capitalization with its Revenue. It shows how much investors are willing to pay for each unit of Revenue generated by the company.

Historical P/S ratios show the valuation multiples at which the company has traded in the past. They can be used as a reference for estimating Fair Value from the company's current Revenue.

P/S Valuation can be useful for companies with negative or volatile earnings, but it does not directly account for profitability, margins or operating efficiency.

How the P/S Model Works

The Price-to-Sales model estimates fair value by calculating the company's historical P/S multiples, selecting a valuation P/S, and applying it to current Revenue to estimate Fair Value per Share.

Historical Revenue & Share Prices
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Calculate Historical P/S
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Select Valuation P/S
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Apply to Current Revenue
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Fair Value per Share

P/S Formula

P/S Ratio=Market CapitalizationRevenue \text{P/S Ratio} = \frac{ \text{Market Capitalization} }{ \text{Revenue} }

Key Model Assumptions

• The company must have positive current Revenue.
• Current Revenue is based on trailing twelve-month (TTM) results when four consecutive quarterly periods are available; otherwise, the latest annual revenue is used.
• Historical P/S ratios are calculated only for years with valid positive Revenue and market data.
• The 10 most recent valid historical P/S ratios are used to estimate the company's typical valuation multiple.
• The historical median P/S forms the Base valuation assumption.
• Conservative and optimistic scenarios adjust the historical median P/S.
• Historical P/S multiples may not remain representative if the company's growth, margins or profitability change materially.

Step 1 — Calculate Historical P/S Ratios

Historical Market Cap = Year-End Share Price × Historical Shares Outstanding

Historical P/S = Historical Market Cap / Historical Revenue

Historical Median P/S = Median of the 10 most recent valid historical P/S ratios

The model calculates historical Market Capitalization and historical P/S ratios. The median of the 10 most recent valid P/S ratios is then used as the company's historical valuation benchmark.

Step 2 — Select the Valuation Multiple

Selected P/S = Historical Median P/S × Scenario Adjustment

The selected scenario adjusts the historical median P/S to determine the valuation multiple used to estimate Fair Value.

Step 3 — Estimate Fair Value per Share

Fair Market Cap = Current Revenue × Selected P/S

Fair Value per Share = Fair Market Cap / Shares Outstanding

The selected P/S multiple is applied to current Revenue to estimate Fair Market Capitalization. The resulting value is divided by Shares Outstanding to estimate Fair Value per Share.

Step 4 — Compare With the Current Market Valuation

Current P/S = Current Market Cap / Current Revenue

Valuation Gap = Fair Value per Share / Current Price − 1

Current P/S shows the multiple currently assigned to the company's Revenue, while the Valuation Gap compares the estimated Fair Value with the current stock price.