--- title: Valuing Stocks Using the Price-to-Sales Ratio description: How to use the price-to-sales P/S ratio to value cyclical and growth stocks, featuring standard formulas, 2026 illustrative examples, and comparison tables. url: https://ginity.vn/en/blog/valuing-stocks-using-price-to-sales-ratio canonical: https://ginity.vn/en/blog/valuing-stocks-using-price-to-sales-ratio markdown: https://ginity.vn/en/blog/valuing-stocks-using-price-to-sales-ratio.md language: en datePublished: 2026-11-01T00:00:00+07:00 dateModified: 2026-11-01T00:00:00+07:00 author: name: Gini url: https://ginity.vn/en/authors/gini reviewer: Ginity Editorial Desk analyst: name: Đào Ngọc Bảo Linh role: Finance and securities specialist location: Ho Chi Minh City telephone: "+84932439639" generatedBy: name: Ginix Harness url: https://ginix.vn desk: id: learn name: Learn investing url: https://ginity.vn/en/learn tickers: [] sources: - name: Securities Investment Newspaper url: https://www.tinnhanhchungkhoan.vn/loi-nhuan-doanh-nghiep-tang-nhung-quy-dau-tu-van-co-the-tu-choi-rot-von-post400546.html title: Rising Corporate Earnings Yet Institutional Funds May Decline Allocations - name: CafeF url: https://cafef.vn/dinh-gia-re-so-voi-lich-su-chua-du-khi-nao-dong-tien-quay-lai-18826101217392629.chn title: Historically Cheap Valuation Is Insufficient Without Inflowing Liquidity - name: Government Electronic Information Portal url: https://vanban.chinhphu.vn/?docid=198541&pageid=27160 title: Securities Law No. 54/2019/QH14 - name: Government News Portal url: https://baochinhphu.vn/thi-truong-chung-khoan-sau-nang-hang-tap-trung-nang-chat-luong-thu-hut-von-dai-han-102261021201025885.htm title: "Securities Market Following Upgrade: Enhancing Quality to Attract Long-Term Capital" - name: Government News Portal url: https://baochinhphu.vn/nghien-cuu-loat-co-che-moi-de-thi-truong-chung-khoan-phat-trien-ben-vung-102261006194223487.htm title: Researching New Regulatory Mechanisms for Sustainable Securities Market Development publisher: Ginity attribution: 'Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content.' disclaimer: "Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources." usageTerms: https://ginity.vn/ai.txt --- # Valuing Stocks Using the Price-to-Sales Ratio > How to use the price-to-sales P/S ratio to value cyclical and growth stocks, featuring standard formulas, 2026 illustrative examples, and comparison tables. Gini · Learn investing · 2026-11-01 · https://ginity.vn/en/blog/valuing-stocks-using-price-to-sales-ratio _Lead analyst: Đào Ngọc Bảo Linh · Finance and securities specialist · Ho Chi Minh City · 0932 439 639_ ## Key takeaways - The price-to-sales P/S ratio benchmarks market capitalization against sales revenue, showing a multiple of 0.5 times in our illustrative model when accounting earnings turn temporarily negative. - At the Vietnam Capital Market Forum on 30/10/2026, fund managers noted that accounting net profits can be distorted by one-off financial gains, requiring investors to verify core operating revenue and cash flow. - P/S ties directly to the P/E multiple through net profit margins, where margins between 3.0% and 20.0% yield P/E ratios from 5.0 times to 33.3 times in our 2026 model. When analyzing corporate valuation, price-to-earnings and price-to-book multiples are common starting points, as examined in [P/E, P/B and when they mislead](/en/blog/pe-pb-when-they-mislead). However, reported net earnings often fluctuate due to non-recurring provisions, depreciation schedules, or one-off items. When a company navigates an industry cyclical trough or aggressively expands its distribution network, temporary net losses cause the denominator of P/E to vanish, making traditional earnings multiples inapplicable. To bridge this gap, the price-to-sales multiple (abbreviated as P/S) provides an effective alternative valuation metric. Net revenue reflects underlying customer sales volume and is less susceptible to subjective accounting estimates. Incorporating revenue multiples also provides a practical cross-check alongside growth measures like the [PEG ratio in valuing growth stocks](/en/blog/peg-ratio-valuing-growth-stocks-and-avoiding-pe-traps). ## 1. Price-to-Sales Ratio and How to Calculate It The P/S ratio compares the total enterprise market capitalization against the net revenue collected across an annual accounting cycle or the trailing four quarters. Economically, this multiple measures the monetary amount investors pay for each unit of gross commercial revenue generated by the firm. The multiple is calculated as the ratio of total market capitalization to net annual revenue: $$\text{Price-to-Sales Ratio} = \frac{\text{Market Capitalization}}{\text{Net Revenue}}$$ On a per-share basis, the valuation multiple divides the current market price of one common share by the net revenue allocated to that share, commonly termed sales per share: $$\text{Price-to-Sales Ratio} = \frac{\text{Market Price Per Share}}{\text{Net Revenue Per Share}}$$ According to Ginity illustrative calculations in 2026, assume a retail company listed on the stock exchange maintains a market capitalization of VND 40,000 billion while recording trailing twelve months net revenue of VND 80,000 billion. Applying the formula above in 2026 yields a price-to-sales ratio calculated by dividing 40,000 by 80,000, which equals 0.5 times. This indicates that in 2026, market participants value each currency unit of the company top-line revenue at 0.5 units of market equity value. A structural advantage of this metric is mathematical persistence. Net revenue rarely drops to zero for an operating business concern. Even during severe industry downturns or when operating margins compress due to elevated input costs, top-line revenue remains observable and captures underlying market footprint. ## 2. Linking Price-to-Sales to Price-to-Earnings While P/S and P/E are frequently treated as disconnected valuation lenses, mathematical corporate finance connects them through net profit margins. The conversion between these relative valuation metrics is expressed as the ratio of the price-to-sales multiple to the net profit margin: $$\text{Price-to-Earnings Ratio} = \frac{\text{Price-to-Sales Ratio}}{\text{Net Profit Margin}}$$ In this structural formulation, net profit margin measures the percentage of net revenue retained as bottom-line net profit after corporate taxes: $$\text{Net Profit Margin} = \frac{\text{Net Income After Tax}}{\text{Net Revenue}} \times 100\%$$ According to Ginity illustrative modeling in 2026, consider two hypothetical companies in distinct sectors that both record VND 10,000 billion in net revenue and carry a market capitalization of VND 10,000 billion, translating to an identical P/S ratio of 1.0 times. Assume in 2026 the first company operates in high-turnover grocery retail with a net margin of 3.0%, generating VND 300 billion in net profit and trading at a P/E multiple of 33.3 times. In contrast, assume in 2026 the second enterprise operates in enterprise software with a net margin of 20.0%, generating VND 2,000 billion in net earnings, which results in a modest P/E multiple of 5.0 times. Illustrative table evaluating margin impacts on relative valuation in 2026: | Enterprise (Hypothetical Case) | Market Cap (VND billion) | Net Revenue (VND billion) | P/S Ratio (times) | Net Profit Margin | Net Income (VND billion) | P/E Multiple (times) | | :--- | :---: | :---: | :---: | :---: | :---: | :---: | | Retail Enterprise A (Illustrative) | 10,000 | 10,000 | 1.0 | 3.0% | 300 | 33.3 | | Software Firm B (Illustrative) | 10,000 | 10,000 | 1.0 | 20.0% | 2,000 | 5.0 | | Cyclical Producer C (Illustrative) | 15,000 | 30,000 | 0.5 | 5.0% | 1,500 | 10.0 | | Cyclical Producer D (Illustrative) | 15,000 | 30,000 | 0.5 | 10.0% | 3,000 | 5.0 | Source: Ginity compiled from 2026 illustrative market modeling. > Chart: Hypothetical P/E multiples across enterprise sectors in 2026 illustrative case. times. Retail A: 33.3; Software B: 5.0; Cyclical C: 10.0; Cyclical D: 5.0. According to Ginity comparative modeling for 2026 above, a P/S ratio of 1.0 times might represent rich pricing for a thin-margin retailer, yet signal an undervalued opportunity for a software company sustaining high margins. ## 3. When Revenue Serves as the Primary Metric Scrutinizing financial quality remains paramount for institutional asset managers. According to reporting from [Securities Investment Newspaper](https://www.tinnhanhchungkhoan.vn/loi-nhuan-doanh-nghiep-tang-nhung-quy-dau-tu-van-co-the-tu-choi-rot-von-post400546.html) covering the Capital Market Forum on the afternoon of 30/10/2026, investment directors highlighted that corporate net profits can rise while operational cash flows remain deeply negative. Reported profits can be inflated through non-operating financial transactions or asset divestments, which fail to build durable enterprise value. Core sales revenue from primary commercial activities therefore serves as a valuable baseline to assess the substance of corporate growth. The P/S multiple demonstrates practical advantages across three operational scenarios: - **Network and retail expansion:** In consumer retail or digital commerce, businesses often accept lower initial profit margins, deploying capital into store openings and customer acquisition. As operating scale matures, earnings can expand rapidly through operational leverage. - **Cyclical industry downturns:** In cyclical sectors such as basic materials or freight shipping, trough prices or elevated input costs can compress net income to minimal levels. While P/E multiples become distorted or negative, sustained revenue shows that commercial operations and customer demand remain intact. - **Corporate turnarounds:** During organizational restructuring, companies frequently recognize non-cash provisions and balance sheet write-downs. These charges lower accounting profit in the short term without diminishing recurring sales revenue. According to an analysis on [CafeF](https://cafef.vn/dinh-gia-re-so-voi-lich-su-chua-du-khi-nao-dong-tien-quay-lai-18826101217392629.chn) on 13/10/2026, the market P/E stood around 12 times, and valuation multiples below historical averages are insufficient to attract liquidity without corporate earnings catalysts. Similarly at the firm level, a low P/S multiple alone does not signal an undervalued stock if revenue growth fails to translate into operating cash flow or sustainable profitability over time. ## 4. Verifying Revenue Quality and Disclosure Rules To avoid the pitfall of uncollectible revenue, financial analysts must cross-reference sales revenue against balance sheet line items, particularly customer accounts receivable. A robust disclosure environment is anchored by regulatory reporting requirements. Under [Securities Law No. 54/2019/QH14](https://vanban.chinhphu.vn/?docid=198541&pageid=27160) dated 26/11/2019, public companies are required to disclose transparent and timely financial statements. Meanwhile, the recognition of net revenue on the income statement is governed by prevailing accounting standards, subtracting commercial discounts, sales allowances, and returns. In parallel, institutional policy continues to advance corporate transparency. Reporting from the [Government News Portal](https://baochinhphu.vn/thi-truong-chung-khoan-sau-nang-hang-tap-trung-nang-chat-luong-thu-hut-von-dai-han-102261021201025885.htm) on 21/10/2026 emphasized governance standards to deepen institutional capital participation following market upgrades. Concurrently, official communications on the [Government News Portal](https://baochinhphu.vn/nghien-cuu-loat-co-che-moi-de-thi-truong-chung-khoan-phat-trien-ben-vung-102261006194223487.htm) on 06/10/2026 confirmed that regulatory authorities are developing structural mechanisms to promote sustainable market development. When analyzing revenue figures, market participants contrast reported revenue growth against operating cash flows. Companies showing rising revenue alongside negative operational cash flows frequently signal aggressive credit terms or growing bad debt exposure. ## Sources - Securities Investment Newspaper: [Rising Corporate Earnings Yet Institutional Funds May Decline Allocations](https://www.tinnhanhchungkhoan.vn/loi-nhuan-doanh-nghiep-tang-nhung-quy-dau-tu-van-co-the-tu-choi-rot-von-post400546.html) (30/10/2026) - CafeF: [Historically Cheap Valuation Is Insufficient Without Inflowing Liquidity](https://cafef.vn/dinh-gia-re-so-voi-lich-su-chua-du-khi-nao-dong-tien-quay-lai-18826101217392629.chn) (13/10/2026) - Government Electronic Information Portal: [Securities Law No. 54/2019/QH14](https://vanban.chinhphu.vn/?docid=198541&pageid=27160) (26/11/2019) - Government News Portal: [Securities Market Following Upgrade: Enhancing Quality to Attract Long-Term Capital](https://baochinhphu.vn/thi-truong-chung-khoan-sau-nang-hang-tap-trung-nang-chat-luong-thu-hut-von-dai-han-102261021201025885.htm) (21/10/2026) - Government News Portal: [Researching New Regulatory Mechanisms for Sustainable Securities Market Development](https://baochinhphu.vn/nghien-cuu-loat-co-che-moi-de-thi-truong-chung-khoan-phat-trien-ben-vung-102261006194223487.htm) (06/10/2026) ## Frequently asked questions ### What does the price-to-sales ratio measure? The price-to-sales ratio measures the market value assigned to each currency unit of sales revenue generated by a business over trailing twelve months. ### When is P/S preferred over P/E? P/S proves valuable when companies undergo aggressive retail expansion, cyclical downturns, or temporary accounting losses where net earnings turn negative. --- _Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content._ _Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources._