**Price to Sales Ratio (PSR)** is a financial indicator used by investors to assess whether a company's stock price is reasonable based on its annual sales. This article will explain the definition, measurement methods, and how to calculate PSR.

#### 1. Definition of Price to Sales Ratio (PSR)

Price to Sales Ratio (PSR) is a ratio that compares a company's stock price with its total annual sales. Like other financial ratios, such as Price to Earnings Ratio (PER) and Price to Book Value (PBV), PSR is used to evaluate the valuation of a stock or the overall value of a company.

In simple terms, PSR shows how much investors are willing to pay for each unit of sales generated by the company. This ratio is an important tool for investors when making investment decisions, especially for companies with significant sales growth.

#### 2. Measuring Price to Sales Ratio (PSR)

PSR is considered one of the easiest valuation ratios to understand and is frequently used by investors. This ratio provides insight into the company's revenue compared to its stock price. In other words, PSR illustrates the relationship between the market price of the stock and the company's operational income without factoring in accounting variables or non-operational expenses.

PSR can vary widely across industries. Therefore, comparisons should be made among companies within the same industry to ensure relevance. A low PSR may indicate that a stock is undervalued and could represent an attractive investment opportunity, while a high PSR might suggest that a company is overvalued by the market.

#### 3. How to Calculate Price to Sales Ratio (PSR)

To calculate PSR, you can use two main formulas:

**PSR = Price per Share / Earnings per Share****PSR = Market Capitalization / Total Sales**

**Definitions:**

**Price per Share:**Available from stock exchanges or investment platforms.**Earnings per Share:**Calculated by dividing total revenue by the number of shares outstanding.**Market Capitalization:**The total market value of all outstanding shares, calculated as price per share multiplied by the number of shares.**Total Sales:**The revenue generated by the company in one year, available in financial reports.

#### 4. Example Calculation of Price to Sales Ratio (PSR)

To better understand, let's look at an example calculation of PSR for PT Waskita Karya (Persero) Tbk with the stock code WSKT. As of March 28, 2018, the stock price for WSKT was Rp 2,530 per share, and the revenue per share was Rp 3,331. Here’s how to calculate PSR:

**Given:**

**Price per Share = Rp 2,530****Earnings per Share = Rp 3,331**

**Calculation:**

- PSR = Price per Share / Earnings per Share
- PSR = 2,530 / 3,331
- PSR = 0.76 times

Thus, the Price to Sales Ratio for PT Waskita Karya is 0.76 times. This indicates that investors are paying Rp 0.76 for every Rp 1 in sales generated by the company.

Let’s also use the second formula. If the market capitalization of WSKT is Rp 34.34 trillion, and the total sales of the company are Rp 45.21 trillion, here’s how to calculate it:

**Calculation:**

- PSR = Market Capitalization / Total Sales
- PSR = 34.34 trillion / 45.21 trillion
- PSR = 0.76 times

Both formulas yield the same result, a PSR of 0.76 times.