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Utilizing Price to Sales Ratio for profit

Navigasi - Price to sales ratio is a term in company fundamentals that is less popular than the Price to Earning Ratio or known as ROE. In fact, if you understand this well, you can benefit from investing in stocks.

Utilizing Price to Sales Ratio for profit
Utilizing Price to Sales Ratio for profit


Therefore, on this occasion, we will explain further about the Price to Sales Ratio, starting from understanding, how to use it, and how to make a profit by analyzing the ratio.

Understanding Price to Sales Ratio


Price to Sales Ratio is the ratio of stock price to sales. Or how to calculate it is the stock price compared to the annual sales of the company.

This is very different from PBV where the share price is compared to the book value of the company. So it's the comparison tool that makes the difference.

In simple terms, PBV is judged by the price of the motorbike, but PS is seen from how much income the motorbike earns. Therefore, these two ratios both assess whether the stock is cheap or expensive. Can be used as a reference.

PBV


If there is a question, it is better to consider PBV or PS, then in general people pay more attention to PBV than PS. It has become popular knowledge.

Usually PBV is always combined with the PER. When both are found to be low, for example, PER is below ten, PBV is below one, then they are immediately sentenced to be cheap.

But you will definitely find one case where sometimes a PBV stock is already very cheap, even in the 0.4 position, but how come the stock is silent, even tends to continue to fall, then you might forget about the PS side.

Therefore, if you ask us, we will answer that both are very important to be considered in assessing stock valuations.

Profit in Price to Sales Ratio


There are several circumstances that can be used to gain maximum profit. First, if you get PBV with equally low PS, then that's the start of the profit. It says low is under 1.

Second state. If one of them is lower, then it is also equally favorable conditions, as long as both are below 1. In our opinion, the potential for profit is very large.

Third state. Usually good stocks are very difficult to get below 1 on a PBV basis. So it is usually above 1. For example, for shares in Nickel, it is difficult to get a price below 1 PBV.

So if that's the case, just pay attention to the PS. Find the lowest. Because it has the potential to profit from rising stock prices. People will see from that side.

Fourth state. If there are stocks with very low PBV, but very high PS, then in our opinion, it is better to avoid them. This condition is usually used by big money to trap retailers.

Looks cheap, but is actually expensive. Example PBV 0.3 but PS above 3, it means expensive. No need to mention the stock. There are many on the market.

Ideal Price to Sales Ratio Valuation Condition


There is one condition that, if we find it, will almost certainly produce abundant profits. But it is difficult. That is finding a combination of PBV, PS, and PER.

These three ratios are very important to assess the value of a stock. If you can find a PBV and PS below one, plus a PER below 10, there will be a lot of people taking advantage of such stock conditions. Find it yourself. Hope to see you.

Hopefully this little information about Price to Sales Ratio is useful and can be taken into consideration to get potential shares and achieve maximum profit.
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