What is a stock's price-to-sales-to-growth ratio (PSG ratio)?

by tess.kassulke , in category: Stocks and Equities , a year ago

What is a stock's price-to-sales-to-growth ratio (PSG ratio)?

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1 answer


by mazie , 10 months ago


The price-to-sales-to-growth ratio (PSG ratio) is a financial metric used to evaluate a company's stock by considering its price-to-sales ratio in relation to its growth rate. It is calculated by dividing a stock's price-to-sales ratio by its annual sales growth rate.

The price-to-sales ratio is determined by dividing the market capitalization of a company by its annual revenue. It helps investors understand how much they are paying for each dollar of sales generated by the company. A low price-to-sales ratio may indicate that the stock is undervalued, while a high ratio may suggest overvaluation.

The growth rate is calculated by comparing a company's revenue from one period to the next, typically on an annual basis. It reflects the company's ability to increase its sales over time.

By using the PSG ratio, investors can assess whether a stock is attractively priced relative to its growth prospects. A lower PSG ratio indicates a more favorable valuation compared to the company's growth rate. Conversely, a higher PSG ratio may suggest an overpriced stock relative to the growth potential.