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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Price to Sales Ratio

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Industrials (^DJI):
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As of 10/20/2017
23,329 165.59 0.7%
9,972 85.59 0.9%
749 1.35 0.2%
6,629 23.98 0.4%
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23.1%
15.0%
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775 or 725 by 11/01/2017
6,700 or 6,500 by 11/01/2017
2,625 or 2,525 by 11/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Fundamental Analysis and Position TradingFundamental Analysis and Position Trading: Evolution of a Trader book., pictured on the left, discusses the price to sales ratio beginning on page 73. The book has an entire chapter devoted to an overview of it along with a performance evaluation.

If you click on this link and then buy the book (or anything) at Amazon.com, the referral will help support this site. Thanks. -- Tom Bulkowski

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This page reviews the results from a study of the price to sales ratio.

Price to Sales Ratio Summary

The price to sales ratio is a popular fundamental analysis ratio. Values below 1.0 often signal an undervalued company.

Value Line defines sales per share as "net sales divided by the number of common shares outstanding at year-end" and sales as "gross volume less returns, discounts, and allowances."

A study of the price to sales ratio shows that stocks having a low ratio outperform those with a high price to sales ratio 71% of the time.

A second test using almost 1,000 samples shows the same result, with stocks having price to sales ratios below or equal to 1.0 beating the performance of those with ratios above 1.0 from 1992 to 2007.

Price to Sales Ratio Methodology

I used the Value Line investment survey and typed in their sales per share or revenue per share numbers to build a database of 178 stocks with data ranging from 12/30/1991 to 7/11/2008.

After completing the database, I logged the close-to-close price change from 1 to 5 years out, looking forward from the base year. The base year ranged from 1992 to 2006. Not all stocks covered the entire range. Years with no numbers were excluded. The price change measured from the close on the last trading day of each year. Years 2008 and later are not included since the year had not completed as of the time of this study.

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Price to Sales Ratio Results

The following table shows the results of price to sales ratio (PSR) versus performance over time.

Base YearPSRMedian PSR1 year2 years3 years4 years5 yearsSamples
1992High0.77-0.2%-5.4%5.5%17.8%21.3%34
Low15.0%-3.8%2.9%11.2%19.6%35
1993High0.77-15.3%3.2%17.8%21.2%9.0%38
Low-13.5%0.8%12.8%22.2%16.5%38
1994High0.5931.8%43.1%39.4%19.4%23.5%39
Low10.5%24.8%38.6%27.2%25.2%40
1995High0.6442.4%35.9%11.8%16.9%20.4%42
Low39.2%54.5%37.4%30.2%26.6%43
1996High0.8418.1%-4.1%6.4%10.3%5.1%45
Low55.3%27.4%19.4%16.1%18.1%45
1997High1.08-24.5%0.3%4.3%0.1%-1.2%46
Low4.7%6.8%6.2%8.7%3.2%47
1998High0.8956.2%15.6%8.3%2.9%9.8%68
Low9.7%10.2%10.7%4.0%11.9%68
1999High1.08-26.0%-14.0%-12.5%-4.7%-0.6%73
Low4.6%11.0%1.3%11.7%16.8%73
2000High0.99-10.6%-10.5%1.2%5.8%8.9%75
Low32.1%4.7%18.6%24.0%22.7%75
2001High1.04-14.3%4.8%11.4%14.8%14.8%76
Low-10.9%14.1%18.9%17.0%20.3%76
2002High0.8731.0%28.8%27.1%23.6%26.6%78
Low44.1%41.6%33.2%36.2%23.9%79
2003High1.0722.7%20.5%17.5%22.2%80
Low24.6%17.6%21.4%9.3%80
2004High1.1727.3%19.3%26.2%83
Low4.1%12.3%1.6%83
2005High1.179.7%20.1%86
Low20.3%-1.2%87
2006High1.3226.9%88
Low-19.2%89

Let's take an example using 2006. Stocks with a price to sales ratio above the median 1.32 had gains averaging 26.9% in 2007 compared to a loss of 19.2% for stocks with a price to sales ratio at or below the median. No more results appear for that row because the years had not ended when the study was done. There were 88 to 89 samples that qualified for the study.

If you count the yearly performance of each entry when the price to sales ratio was above or below the median, you will find that stocks with a low price to sales ratio outperformed those with a high ratio 71% of the time (46/65).

I consider this result preliminary, but it does obey common investment knowledge. I intend to expand the database and then publish my findings.

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Price to Sales Ratio Second Test

In a second test, I compared stocks with price to sales ratios over 1.0 with those at or below 1.0. The following table shows the results.

PSR1 Year MoveSamples
Over 1.010.7%955
Below or equal to 1.012.1%954

Using almost 1,000 samples, I found that those stocks with price to sales ratios below or equal to 1.0 outperformed those with ratios above 1.0 from 1992 to 2007 on a 1 year basis. In other words, I computed each stock's price to sales ratio for 1992 and measured the price change from year end 1992 to year end 1993 and then moved to 1993 and started a new calculation, and so on until I ran out of data. Sorting the price to sales ratios and averaging the performance gave the results shown in the table.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Q: Why are husbands like lawn mowers? A: They are hard to get started, emit foul odors, and don't work half the time.