How sales per share works

Sales per share is a year's sales divided by the share count:

$$\text{SPS} = \frac{\text{Sales}}{N}$$

On $2,500,000,000 of sales and 100,000,000 shares, SPS is $25. Price over that SPS is P/S. A $50 share on $25 is 2 times. Market capitalisation over sales is the same 2: $5,000,000,000 / $2,500,000,000.

The two routes are the same identity. Multiplying price and SPS by the share count cancels, so market cap over sales cannot disagree with price over SPS unless one of the three inputs is from a different date than the others.

The price to sales calculator on this page works both routes from one set of figures. How price to sales works is the multiple. This page is the $25 in the denominator.

How earnings per share works is a year's profit cut into shares. This page is a year's sales cut into shares. A firm with no profit can still have an SPS.

Keep the $50 price and 100,000,000 shares. Cut SPS to $10. Total sales are $1,000,000,000. P/S is 5. Market cap is still $5,000,000,000.

The share did not get dearer. The year sold less. A higher P/S here is a thinner SPS, not a more expensive share. Sorting a list by P/S low to high is a ranking of that ratio, not a bargain screen on its own.

Price $80, SPS $16, shares 50,000,000. Total sales are $800,000,000. Market cap is $4,000,000,000. P/S is 5.

The same $16 of SPS on half the first sheet's shares is a smaller sales pile. SPS hides scale the way P/S does. Put the share count back in before lining two names up.

P/E against P/S is the earnings multiple against the sales multiple. This page is the sales per share those two both need in the background.

How book value per share works is the accounting residual cut into shares. Do not paste this $2,500,000,000 of sales onto that book pile. Different sheet, different claim.

It is not a market price. It is not EPS. Earnings per share is a year's profit cut into shares. SPS is the top line cut into shares. A high-margin firm can print a modest SPS and a high EPS at once, because profit is a thin slice of sales.

It is not a cash line. Sales have not paid cost of goods, wages, tax or capex. How free cash flow works is further down the statement.

It is not the P/S multiple. How price to sales works owns the 2. This page owns the dollars in the denominator.

When sales are zero, SPS is zero and P/S stops working. This calculator prints no P/S in that case. Zero sales is a description of the year, not a per-share figure anyone can spend.

A low SPS next to a high price is common where the year was thin. It is not, on its own, a bargain.

It is not a P/S screen, not an EV/sales engine, and not a claim that $25 of SPS is large or small. The three sheets are $25 of SPS on $2,500,000,000 of sales, $10 when sales are $1,000,000,000, and $16 on 50,000,000 shares. This is educational material, not financial advice.