"He doesn't bother with Price/Sales as a measure."
That wouldn't surprise me.
I cannot see the value of using a "Variable", such as "Price" in a determination ratio, with the possible exception of Price/EPS (P/E), where at least one is saying that one is paying $P/share now, and based on that company's annual earnings per share of "E", it will take about "P/E" years to theoretically get one's money back.
With P/S you have the Sales item, S, which gets reported on every 3 months in terms of a company's "Total Revenue". You then divide that Sales/share item into the company's current Price/share which can vary, at times, quite dramatically from one day or one week to the next.
Personally I can't see the relevance or value in using a ratio which can vary to quite a large extent over relatively short periods of time.
As far as I'm concerned what is important about "Sales" is how much of it finally ends up at the Bottom Line .... the more of it the better for shareholders because it could contribute well towards their Dividends. And secondly, the more that is left over after Dividends are paid, the more will get added to "Retained Income" on the company's Balance Sheet. |
