![]() The sales per share metric is calculated by dividing a company’s sales by the number of outstanding shares. ![]() The current stock price can be found by plugging the stock symbol into any major finance website. To determine the P/S ratio, one must divide the current stock price by the sales per share. A P/S ratio that is based on forecast sales for the current year is called a forward P/S ratio. The typical 12-month period used for sales in the P/S ratio is generally the past four quarters (also called trailing 12 months or TTM), or the most recent or current fiscal year (FY). ![]() A low ratio may indicate the stock is undervalued, while a ratio that is significantly above the average may suggest overvaluation. Like all ratios, the P/S ratio is most relevant when used to compare companies in the same sector. The P/S ratio is also known as a sales multiple or revenue multiple. It can be calculated either by dividing the company’s market capitalization by its total sales over a designated period (usually twelve months) or on a per-share basis by dividing the stock price by sales per share. The P/S ratio shows how much investors are willing to pay per dollar of sales. The P/S ratio is a key analysis and valuation tool for investors and analysts. 1, “ Apple Stock Is at 4-Month Lows and Looks Attractive to Value Investors.” Since Apple's dividend yield is so low (0.54%) it makes sense for existing shareholders to enhance their yield by selling out-of-the-money (OTM) puts in near-term expiration periods to gain extra income.Investopedia / Candra Huff Understanding Price-to-Sales (P/S) Ratio We discussed this in our last Barchart article on Oct. One Way to Play This is to Sell Short OTM Puts Many analysts and investors are forgetting this as they focus on the latest sales dip. This shows why Apple's free cash flow is so powerful and deterministic about Apple's underlying value. That will increase the per-share value even more. This also does not take into account Apple's huge stock buybacks using its free cash flow. So, if we slightly lower the FCF yield to 3.5% (i.e., increase the multiple to 28.57, since 3.5% is the inverse of that multiple) then the market cap will rise to $3.36 trillion. That is also the same as a 27.5x multiple on its last 12-month FCF. Its present FCF is $100 billion, which represents 3.6% of its $2.75 trillion market value. This also leads to a price target of $215.69 (i.e., 22.1% over today's price of $176.65). That implies a gain of 22.1 in its market cap over the next year. This is up from its present market cap of $2.75 trillion. AAPL Stock Could Rise Based on FCF Estimatesįor example, using a 3.5% FCF yield, AAPL stock could be worth $3.36 trillion (i.e., $117.6b/0.035). That could also lead to a higher AAPL price target. Using a higher FCF margin of say 28% could imply free cash flow will rise to $117.6 billion, up 17.6% from the latest 12-month FCF figure. 2025, revenue is seen by analysts as rising to $420 billion. Moreover, the total FCF margin was very strong at 26.1% (i.e., $100b/$383b) A higher services component could lead to higher total free cash flows for Apple in the long run.įor example, analysts forecast sales this fiscal year will rise close to $400 billion at $396 billion. For example, the services gross margin was 29.1% compared to 29.5% in the prior year quarter. This is likely due to the strong performance of its services division. More importantly, the FCF margin in the last quarter stayed very strong at $21.7% (i.e., $19.4b/$89.5 b).
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