Price-to-Sales Ratio By Industry (2025)
As of 2025, the Price-to-Sales (P/S) ratio has demonstrated notable trends that reflect broader market conditions and investor sentiment. The P/S ratio has shown a significant upward trend over the last five years, when it surged by over 40% alone for the NASDAQ Market.
The current P/S ratio for the S&P 500 in January 2025 is around 2.84, indicating a significant increase from previous years. This represents an advancement in the ratio of about 25% in 2024. As companies continue to report strong revenues, investors will need to monitor these trends alongside other valuation metrics to make informed investment decisions. It boosts investor confidence, particularly in growth-oriented sectors.
This article outlines the latest data on average P/S ratios across various industries in 2025.
Price to sales ratio or P/S ratio
The price-to-sales ratio (P/S) is computed by dividing a company’s market capitalization (number of outstanding shares multiplied by the share price) by its total sales or revenue for the previous 12 months. The investment is more appealing if the P/S ratio is low. The price-to-sales ratio (P/S) is computed by dividing a company’s market capitalization (number of outstanding shares multiplied by the share price) by its total sales or revenue for the previous 12 months.
What is the price to sales or P/S ratio?
The price-to-sales (P/S) ratio, or PSR, is a valuation metric that compares the stock price of a business to its revenue. It’s a measure of how much the financial markets value each dollar of a company’s sales or profits. It indicates how much money investors are ready to pay for a stock per dollar of sales. Divide the stock price by the underlying company’s sales per share to get the P/S ratio. A low ratio may suggest that the stock is cheap, while a high ratio may be overpriced.
How does the price to sales ratio or P/S ratio work?
The price-to-sales ratio (P/S) is computed by dividing a company’s market capitalization (the number of outstanding shares multiplied by the share price) by its total sales or revenue for the previous 12 months. The investment is more appealing if the P/S ratio is low. The P/S ratio is a valuable metric for evaluating equities. It looks at a company’s market capitalization and revenue to see if it’s overvalued or undervalued. The price-to-sales ratio reveals how much each dollar of a company’s sales is worth in the market. This ratio might be useful in determining the value of growth stocks that have yet to make a profit or have had a brief setback.
Why is the price to sales ratio important in business valuation?
When contrasted to its market share price, a price-to-sales ratio can assist identify a firm that is either undervalued or overpriced. Because revenue data is often more difficult to alter or adjust than a firm’s net income or book value, investment gurus may rely largely on the price-to-sales ratio. Whether the truth is good or negative, investors want to know. Sales-to-price ratios identify a company’s strength without taking into account operational expenditures, which might be altered in the past.
How do investors get benefits from the price to sales ratio?
For firms that have had periods of tremendous early success, investors boost expectations to unreasonable heights. When such firms’ profits decline or fail to meet investors’ excessive expectations, stock prices plummet as investors overreact and sell. Good firms’ sales are generally stable over time, are relatively difficult to manipulate, and are less susceptible to accounting tricks.
Disadvantages of price to sales ratio
The most high-level metric of a company’s financial performance is revenue. Even though a thorough grasp of a company’s revenue recognition procedures is required to adjust revenues generated in each quarter appropriately, it is less susceptible to accounting manipulations than net income. However, the P/S ratio has certain severe flaws, such as:
- Revenue per share does not tell the whole story because it ignores the impact of a company’s cost structure and capital structure, i.e. simply generating high revenue isn’t enough because investors are concerned with net wealth addition, which can only be achieved when revenue translates to net income.
- The stock price is impacted by capital structure in the numerator of the P/S ratio, but the denominator does not reflect the impact of financing, creating a possible mismatch between two variables.
- Even while the P/S ratio is less susceptible to accounting fraud, it is not impervious to it. To ensure that income is neither inflated nor underestimated in a period.
How to calculate price to sales ratio?
The P/S ratio determines whether a firm is cheap or overpriced in comparison to its peers. This measure will assist you in determining the company’s desirability within its industry.
Price to sales Ratio Formula
The entire sales value may be seen on the income statement, as well as the total number of outstanding shares, which can be located in the notes section of the same document.
The value of the price to earnings ratio, like other financial measures, can fluctuate every day thus it’s critical that the valuation is time stamped. The P/S ratio is not the company’s real value but rather its predicted value, which is then used to determine the genuine value and compare it to other firms in the same industry.
Example of Calculation
A toy company’s share price and sales per share. The price-to-earnings ratio (10/8 = 1.25) is also calculated. Over three years, the company’s stock price soared by 50%, although sales per share increased at a slower rate. It basically means that investors are now paying more for shares than they were three years ago.
When we look at the P/S ratio, we can see that in Year 1, investors paid $1.25 per share, but in Year 3, they paid $1.50 per share. A rise in the P/S ratio can be caused by a number of things.
What should be the ideal price to sales ratio in your business?
A PSR of less than 0.75 is extremely desirable for non-cyclical and technology firms, although equities with a PSR of 0.75-1.5 are regarded as strong buys. Those having a PSR greater than three are deemed high-risk. A PSR of less than 0.4 is preferred for cyclical equities. Increasing the asset’s life duration arbitrarily or changing the depreciation computation technique can have a significant impact on earnings and profits.
Furthermore, techniques such as delaying or capitalizing expenditures can be used to influence earnings or profits. The price to sales ratio is computed by dividing the stock’s market price by the number of shares sold. It may also be determined by multiplying the company’s market capitalization by its yearly sales. The PSR is commonly used to analyze the value of cyclical equities and is great for assessing firms in the investing phase. The ratio illustrates how many years it takes for a company’s sales to match its market value.
Price to sales ratio by industry (2025)
One of several stock valuation indicators is the price-to-sales ratio, commonly known as “price/sales”, “P/S ratio”, or “list-price-to-sale-price ratio”. The ratio expresses how much it costs to purchase one share of a corporation in relation to how much revenue it creates for the company. The lower the P/S ratio, in general, the better.
| Sr.No | Industries | PS Ratio (TTM) as of January 2025 |
|---|---|---|
| A | Communication Services | 3.24 |
| 1 | Advertising | 1.937 |
| 2 | Alternative Carriers | 0.9398 |
| 3 | Broadcasting | 0.5853 |
| 4 | Cable & Satellite | 0.9601 |
| 5 | Integrated Telecommunication Services | 1.375 |
| 6 | Interactive Home Entertainment | 4.175 |
| 7 | Interactive Media & Services | 7.076 |
| 8 | Movies & Entertainment | 3.09 |
| 9 | Publishing | 1.522 |
| 10 | Wireless Telecommunication Services | 1.887 |
| B | Consumer Dicretionary | 1.617 |
| 1 | Apparel Retail | 2.121 |
| 2 | Apparel, Accessories & Luxury Goods | 1.75 |
| 3 | Automobile Manufacturers | 1.075 |
| 4 | Automotive Parts & Equipment | 0.5329 |
| 5 | Automotive Retail | 0.7145 |
| 6 | Broadline Retail | 2.538 |
| 7 | Casinos & Gaming | 1.764 |
| 8 | Computer & Electronics Retail | 0.4768 |
| 9 | Consumer Electronics | 1.796 |
| 10 | Distributors | 0.68 |
| 11 | Education Services | 2.141 |
| 12 | Footwear | 2.308 |
| 13 | Home Furnishings | 0.7966 |
| 14 | Home Improvement Retail | 2.14 |
| 15 | Homebuilding | 1.853 |
| 16 | Homefurnishing Retail | 1.374 |
| 17 | Hotels, Resorts & Cruise Lines | 2.949 |
| 18 | Household Appliances | 0.6743 |
| 19 | Housewares & Specialties | 0.5858 |
| 20 | Leisure Facilities | 2.248 |
| 21 | Leisure Products | 1.133 |
| 22 | Motorcycle Manufacturers | 0.5349 |
| 23 | Other Specialty Retail | 1.049 |
| 24 | Restaurants | 3.09 |
| 25 | Specialized Consumer Services | 1.799 |
| 26 | Textiles | 0.244 |
| 27 | Tires & Rubber | 0.5412 |
| C | Consumer Staples | 1.12 |
| 1 | Agricultural Products & Services | 0.4777 |
| 2 | Brewers | 1.22 |
| 3 | Consumer Staples Merchandise Retail | 1.075 |
| 4 | Distillers & Vintners | 2.422 |
| 5 | Drug Retail | 0.5231 |
| 6 | Food Distributors | 0.2695 |
| 7 | Food Retail | 0.4692 |
| 8 | Household Products | 3.258 |
| 9 | Packaged Foods & Meats | 0.9113 |
| 10 | Personal Care Products | 1.925 |
| 11 | Soft Drinks & Non-alcoholic Beverages | 2.471 |
| 12 | Tobacco | 3.361 |
| D | Energy | 0.844 |
| 1 | Coal & Consumable Fuels | 1.212 |
| 2 | Integrated Oil & Gas | 0.6543 |
| 3 | Oil & Gas Drilling | 0.8509 |
| 4 | Oil & Gas Equipment & Services | 1.187 |
| 5 | Oil & Gas Exploration & Production | 2.337 |
| 6 | Oil & Gas Refining & Marketing | 0.2649 |
| 7 | Oil & Gas Storage & Transportation | 1.55 |
| E | Financials | 2.233 |
| 1 | Asset Management & Custody Banks | 3.434 |
| 2 | Commercial & Residential Mortgage Finance | 0.7845 |
| 3 | Consumer Finance | 2.201 |
| 4 | Diversified Banks | 2.301 |
| 5 | Diversified Capital Markets | 1.714 |
| 6 | Diversified Financial Services | 2.027 |
| 7 | Financial Exchanges & Data | 8.73 |
| 8 | Insurance Brokers | 4.354 |
| 9 | Investment Banking & Brokerage | 2.276 |
| 10 | Life & Health Insurance | 0.8452 |
| 11 | Mortgage REITs | 4.789 |
| 12 | Multi-line Insurance | 0.8426 |
| 13 | Multi-Sector Holdings | 2.26 |
| 14 | Property & Casualty Insurance | 1.228 |
| 15 | Regional Banks | 3.487 |
| 16 | Reinsurance | 0.9361 |
| 17 | Specialized Finance | 0.096 |
| 18 | Transaction & Payment Processing Services | 7.168 |
| F | Health Care | 1.852 |
| 1 | Biotechnology | 5.532 |
| 2 | Health Care Distributors | 0.1885 |
| 3 | Health Care Equipment | 4.326 |
| 4 | Health Care Facilities | 1.012 |
| 5 | Health Care Services | 0.3954 |
| 6 | Health Care Supplies | 3.269 |
| 7 | Health Care Technology | 4.074 |
| 8 | Life Sciences Tools & Services | 4.793 |
| 9 | Managed Health Care | 0.7343 |
| 10 | Pharmaceuticals | 3.856 |
| G | Industrials | 1.604 |
| 1 | Aerospace & Defense | 2.233 |
| 2 | Agricultural & Farm Machinery | 1.342 |
| 3 | Air Freight & Logistics | 0.8214 |
| 4 | Airport Services | 3.553 |
| 5 | Building Products | 2.139 |
| 6 | Cargo Ground Transportation | 1.642 |
| 7 | Commercial Printing | 0.7214 |
| 8 | Construction & Engineering | 0.775 |
| 9 | Construction Machinery & Heavy Transportation Equipment | 1.169 |
| 10 | Data Processing & Outsourced Services | 2.005 |
| 11 | Diversified Support Services | 3.435 |
| 12 | Electrical Components & Equipment | 3.165 |
| 13 | Environmental & Facilities Services | 3.127 |
| 14 | Heavy Electrical Equipment | 1.407 |
| 15 | Highways & Railtracks | 2.262 |
| 16 | Human Resource & Employment Services | 1.837 |
| 17 | Industrial Conglomerates | 1.249 |
| 18 | Industrial Machinery & Supplies & Components | 2.367 |
| 19 | Marine Ports & Services | 3.207 |
| 20 | Marine Transportation | 0.7732 |
| 21 | Office Services & Supplies | 0.8831 |
| 22 | Passenger Airlines | 0.5499 |
| 23 | Passenger Ground Transportation | 2.053 |
| 24 | Rail Transportation | 4.787 |
| 25 | Research & Consulting Services | 2.422 |
| 26 | Security & Alarm Services | 0.6174 |
| 27 | Trading Companies & Distributors | 1.444 |
| H | Information Technology | 6.262 |
| 1 | Application Software | 8.806 |
| 2 | Communications Equipment | 3.63 |
| 3 | Electronic Components | 2.562 |
| 4 | Electronic Equipment & Instruments | 5.021 |
| 5 | Electronic Manufacturing Services | 0.6218 |
| 6 | Internet Services & Infrastructure | 8.089 |
| 7 | IT Consulting & Other Services | 2.647 |
| 8 | Semiconductor Materials & Equipment | 6.009 |
| 9 | Semiconductors | 10.81 |
| 10 | Systems Software | 11.26 |
| 11 | Technology Distributors | 0.5145 |
| 12 | Technology Hardware, Storage & Peripherals | 4.588 |
| I | Materials | 1.171 |
| 1 | Aluminum | 0.4609 |
| 2 | Commodity Chemicals | 0.7569 |
| 3 | Construction Materials | 1.785 |
| 4 | Copper | 1.122 |
| 5 | Diversified Chemicals | 0.5316 |
| 6 | Diversified Metals & Mining | 1.301 |
| 7 | Fertilizers & Agricultural Chemicals | 1.173 |
| 8 | Forest Products | 1.334 |
| 9 | Gold | 2.412 |
| 10 | Industrial Gases | 5.783 |
| 11 | Metal, Glass & Plastic Containers | 0.9188 |
| 12 | Paper & Plastic Packaging Products & Materials | 1.234 |
| 13 | Paper Products | 1.015 |
| 14 | Precious Metals & Minerals | 1.056 |
| 15 | Silver | 2.864 |
| 16 | Specialty Chemicals | 1.662 |
| 17 | Steel | 0.4887 |
| J | Real Estate | 3.86 |
| 1 | Data Center REITs | 10.14 |
| 2 | Diversified Real Estate Activities | 2.073 |
| 3 | Diversified REITs | 4.376 |
| 4 | Health Care REITs | 6.038 |
| 5 | Hotel & Resort REITs | 1.507 |
| 6 | Industrial REITs | 7.424 |
| 7 | Multi-Family Residential REITs | 7.769 |
| 8 | Office REITs | 3.08 |
| 9 | Other Specialized REITs | 5.33 |
| 10 | Real Estate Development | 0.4837 |
| 11 | Real Estate Operating Companies | 4.601 |
| 12 | Real Estate Services | 1.173 |
| 13 | Retail REITs | 7.242 |
| 14 | Self-Storage REITs | 9.398 |
| 15 | Single-Family Residential REITs | 6.352 |
| 16 | Telecom Tower REITs | 6.92 |
| 17 | Timber REITs | 2.989 |
| K | Utilities | 0.4063 |
| 1 | Electric Utilities | 0.276 |
| 2 | Gas Utilities | 1.566 |
| 3 | Independent Power Producers & Energy Traders | 0.9354 |
| 4 | Multi-Utilities | 1.566 |
| 5 | Renewable Electricity | 1.928 |
| 6 | Water Utilities | 2.989 |
Price-to-sales (P/S) ratios of one to two are regarded as good, and P/S ratios of less than one are considered exceptional. P/S ratios, like other stock valuation indicators, vary greatly by industry.
Source: https://ycharts.com/classifications/sectors for United States on January 13, 2025
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The Price-to-Sales (P/S) ratio is a vital metric for evaluating companies’ market valuations in relation to their revenue. It is particularly useful in industries where profit margins are low, or companies may not yet be profitable, making traditional earnings-based metrics less applicable.
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With our best equity management tool, companies can integrate sales data with equity information, and businesses can analyze how changes in revenue impact their P/S ratio. Eqvista’s comprehensive platform can analyze sales growth over time, providing context for the P/S ratio. Understanding trends in sales can help companies adjust their strategies to improve their valuation metrics.
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