Price to Sales Ratio (Price/Sales)
The Price/Sales ratio compares the price of the common stock relative to the revenues of the company.
Studies showed that groups of stocks with high Price/Sales ratio, on average have very poor stock performances relative to the groups of stocks with low Price/Sales ratio.
Investors should be aware that industries with low operating profit margins will always have a low Price/Sales ratio.
Investors should compare the current Price/Sales ratio to the historical trends.