Price/sales (projected) for a stock is the ratio of the company’s most recent month-end share price to the company’s estimated sales per share (SPS) for the current fiscal year. Morningstar calculates internal estimates for the current year SPS based on the most recently reported SPS and average historical sales growth rates.
For portfolios, this data point is calculated by taking an asset-weighted average of the sales yields (S/P) of all the stocks in the portfolio and then taking the reciprocal of the result.
Note: This is one of the five value factors used to calculate the Morningstar Investment Style Box.
Benefits
Price/sales is a valuation measure that indicates how much an investor is paying for a revenue stream. Because revenue measures are less subject to accounting standards than many financial statement figures, this valuation measure is more useful than many others in comparing stocks from different countries. Still, without information about the profit margins of the underlying stocks, this statistic is of limited use. This is less of a problem for specialty portfolios, since margins across specific industries are more consistent.
Origin
Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager.