# ps Ratio Formula: Understand Forex Trading Better

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## What is the P/S Ratio and How to Use It to Trade on trading-with-pivot-points/” title=”tradingvie ピボット": An Insight into Forex Trading with Pivot Points”>Forex?

When trading on the Forex market, you often hear about a so called “ratio” or “metric” – the P/S Ratio. As you will see in the text below, knowing what P/S Ratio is and how to use it might be very beneficial for a successful trading in this market.

## Price-to-Sales Ratio

P/S Ratio is an alternative to P/E – the price-to-earning ratio, which is used for comparing the values of companies. P/S Ratio stands for Price-to-Sales ratio and it is used to compare the stock prices of various companies with their revenues. The formula of calculation is simple: you just need to divide the company’s market cap (the total value of its stocks) with the company’s total revenues for the past 12 months.

The P/S Ratio gives you the idea of how much a company earns for each unit of its shares. The higher the P/S Ratio, the greater is the stock worth in terms of revenue. Here is an example of calculation: let’s suppose that your company has the market cap of \$10 billion and earned \$2 billion in revenue over the past 12 months, then the P/S Ratio of this company is 10:2, or 5.

## Benefits of Using P/S Ratio to Trade on Forex

It is always useful to compare P/S Ratios of various companies before you invest in the respective stocks. This method gives you the idea of which company is more attractive and reliable for investment. Knowing the P/S Ratios before you invest in the stock market helps you to make a wiser decision.

Moreover, it also proved itself highly useful when it comes to trading on Forex. P/S Ratios help to identify opportunities for entering trades or exiting them. Although P/S Ratios may have weaker correlation with stock prices than P/E Ratios, they can still be very helpful in making the trading decisions.

In conclusion, using the P/S Ratio is a valuable tool for making investments in the stock market. Knowing the results of this ratio can make wise financial decision and maximize your earnings on Forex.

## What is Price to Sales Ratio?

The Price to Sales Ratio, often abbreviated as PS Ratio, measures the market value of a company relative to its total sales in a given period. It can be calculated by dividing the company’s market capitalization by its total revenue over the past 12 months. This is sometimes called the price-to-sales ratio or market capitalization over sales ratio. This ratio is useful in analyzing growth stocks, since the stock price can grow quickly regardless of revenue growth. It is also a great tool for investors to compare similar companies in the same industry.

## How to Calculate Price to Sales Ratio?

The Price to Sales Ratio is fairly simple to calculate. All that is required is the company’s market capitalization (current stock price multiplied by the number of outstanding shares) and total revenue over the past 12 months. The resulting figure is the PS Ratio. For example, if a company has a market capitalization of \$100 million and total revenue of \$50 million in the past 12 months, the PS Ratio would be 2. In other words, the market values the company’s sales at 2 times its total annual revenue.

## What Does Price to Sales Ratio Tell Us?

The Price to Sales Ratio can provide investors with valuable insight into a company’s potential. A higher PS Ratio usually indicates that the market views the company as having good potential for future growth. On the other hand, a lower ratio usually suggests that the market does not see much potential for the company’s stock price to go up. Similarly, a low PS Ratio could also indicate that the company is undervalued in the market, offering investors a great buying opportunity.