What is p/s and p/b?

P/S and P/B are two distinct abbreviations with different meanings in the context of business and finance.

1. P/S (Price-to-Sales Ratio):
   • Definition: The P/S ratio is a valuation metric used to compare a company's stock price to its revenues It helps investors understand how much the market values each dollar of a company's sales.
   • Calculation: It is calculated by dividing the company's market capitalization by its total sales over a designated period, usually twelve months. Alternatively, it can be calculated on a per-share basis by dividing the stock price by sales per share.
   • Usage: The P/S ratio is particularly useful for comparing the value of companies in the same industry, as it provides a measure of the market's valuation of a company's sales.
2. P/B (Price-to-Book Ratio):
   • Definition: The P/B ratio is a financial metric that compares a company's market value to its book value It indicates how much investors are willing to pay for each dollar of the company's assets as listed on the balance sheet.
   • Calculation: It is calculated by dividing the stock price per share by the book value per share (BVPS), which is the value of a company's assets minus liabilities
   • Usage: The P/B ratio is used by investors to identify potential investments and to compare a company's market value to its asset value. A P/B ratio below 1 suggests that the market value of the company is less than its book value, which may indicate an undervaluation.

In summary, the P/S ratio relates a company's stock price to its sales, while the P/B ratio connects the stock price to the company's book value. Both ratios are used by investors to assess the value of a company, but they reflect different aspects of a company's financial status.