Relative Value Ratios

Earnings per Share

Amount of profit a company makes per share

Earnings per Share = Net Income / Average Outstanding Shares

Price-to-Earnings Ratio
Amount investor pays per share for each dollar of
profit per share

Price-to-Earnings Ratio = Price per Share / Earnings per Share

Price-to-Sales Ratio
Measure of share price as a proportion of sales

Price-to-Sales Ratio = (Total Shares * Price per Share) / Total Sales

OR
Price-to-Sales Ratio = Current Market Capitalization / Total Sales

Price-to-Cash Flow Ratio

Measure of share price as a proportion of cash

Price-to-Cash Flow Ratio = Price per Share / Cash Flow per Share