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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Pam who wrote (28051)	4/26/2005 9:44:57 PM
From: Dave	Read Replies (1) \| Respond to of 60323

Pam, RE: P/S ratio This about the P/S ratio this way. Let's assume that the price of a stock is related to its earnings plus an error. As such, put the Price on the y-axis and Earnings on the X-axis. Now, divide both Price and Earnings by Sales (or Revenues). As such, there is a strong correlation between the P/S ratio and the E/S (or net margin). Therefore, companies with high net margins should trade at high P/S ratios. That is the logic behind looking at the P/S ratio. Best regards, Dave