How To Use Price-To-Sales Ratios To Value Stocks

Any number of scenarios could explain this discrepancy, so it's important to know what makes ABC stock so much more appealing. If you can't find a good reason, perhaps stock XYZ is undervalued , and represents a good bargain.

Bargains -- How to Spot the Difference ].

Price to Sales Ratio Analysis • The Strategic CFO

Other income statement items, like earnings , can be easily manipulated by using different accounting rules. Even though sales are difficult to manipulate, it's not impossible.

Always read financial statements thoroughly to understand the firm's revenue recognition policy. One of Enron's accounting tricks was to recognize revenue earlier than it should have, enabling it to report inflated sales figures.

For example, a business may have higher sales but a lower profit margin than a competitor, indicating that it's not operating efficiently. Our in-depth tools give millions of people across the globe highly detailed and thoroughly explained answers to their most important financial questions.

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