ILLUSTRATION 8.5: Comparing Price-to-Sales Ratios
across Specialty Retailers
Price-to-salesratiosareusedwidelytoanalyzeretailfirms.In
Figure8.11,theprice-to-salesratiosofspecialtyretailfirms
intheUnitedStatesareplottedagainstthenetprofitmargins
of these firms.
FIGURE 8.11Price-to-Sales Ratios and Net Profit Margins
Firms with higher net margins tend to have higher
price-to-sales ratios, while firms with lower margins have
lower price-to-sales ratios. As with P/E, PEG, and
price-to-book ratios, a regression of price-to-sales ratios