A company's sales on its income statement is the amount of money it earned from selling its products or services to customers during an accounting period before paying any expenses. A company's price-to-sales (P/S) ratio is a valuation metric that investors use to determine the relative value of a stock. The ratio equals a company's stock price per share divided by its sales per share. A higher ratio means investors are willing to pay more for each dollar of the company's sales. If you know a company's P/S ratio and its total shares outstanding, you can calculate its sales.
1. Visit any financial website that provides stock information and find a company's price-to-sales ratio, its price per share and its total number of outstanding shares. For example, assume a company's P/S ratio is 1.5, its price per share is $5 and it has 1 million total outstanding shares.
2. Substitute the values into the P/S ratio formula: P/S ratio = price per share/(sales/outstanding shares). In this example, you get the formula 1.5 = $5/(sales/1 million).
3. Divide the company's P/S ratio by its total number of outstanding shares. In this example, divide 1.5 by 1 million to get 0.0000015.
4. Divide the stock's price per share by your result to calculate the company's sales over the past 12 months, which it would report on its income statement. In this example, divide $5 by 0.0000015 to get $3.3 million in sales, which is the amount of sales the company has generated in the past 12 months.
5. Compare the company's sales to previous years to determine any changes. Increasing sales suggest the company may be growing its market share and attracting new customers.
- Jupiterimages/Brand X Pictures/Getty Images