By VestAI Research | Last updated: March 2026
Price-to-Sales Ratio: Meaning, Definition & Indian Stock Market Examples
Market cap divided by annual revenue — useful when profits are zero or negative.
What is Price-to-Sales Ratio?
Price-to-Sales (P/S) ratio = Market Capitalisation ÷ Annual Revenue (or Stock Price ÷ Revenue Per Share). It is particularly useful for valuing companies with negative earnings where PE ratio cannot be calculated, and for comparing companies with different profit margins.
Price-to-Sales Ratio — Indian Stock Market Example
Zomato was valued at P/S ratios of 8–15x during its high-growth phase before turning profitable. Nykaa listed at very high P/S multiples reflecting growth expectations. Mature FMCG companies like HUL typically trade at P/S of 8–12x. P/S is most common in early-stage tech and startup valuations.
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Analyse with OrionFrequently Asked Questions about Price-to-Sales Ratio
When is P/S ratio most useful?
P/S is best for: (1) Pre-profit or early-stage companies, (2) Companies with temporarily depressed earnings due to investments, (3) Comparing companies with different accounting for revenue. It is less useful when margins vary widely across peers — two companies with same revenue but very different profitability get the same P/S but very different actual value.
What P/S ratio is reasonable for Indian tech companies?
Indian tech companies with high growth (30%+ revenue CAGR) often trade at 8–20x P/S. For mature, slow-growing businesses, P/S below 2–3x is more typical. As growth slows, P/S multiples compress — this is common for post-IPO new-age Indian companies.
Related Terms
PE Ratio
Price divided by earnings per share — shows how much investors pay per ₹1 of profit.
Enterprise Value
Market cap + net debt — total value of the business regardless of capital structure.
Revenue Growth
Percentage increase in total sales versus a prior period.
Gross Profit Margin
(Revenue − cost of goods sold) ÷ revenue — measures production profitability.
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