Sales

It is notoriously difficult to value start-ups. Typically, most start-ups make losses for several years, yet many technology start-ups, for example, can have huge valuations.

In the absence of profits, many analysts focus on sales growth as a measure of future growth potential, and this is reflected in the sales-to-stock price ratio.
Sales-to-stock-price ratios

The sales-to-stock-price ratio is calculated by dividing the total annual sales per share by the stock price. To calculate the annual sales per share, divide the annual sales total by the number of shares. So if the company made sales of £10 million and has a total issue of one million shares, than the annual sales-per-share figure is £10.

To calculate the sales-to-stock-price ratio, divide the annual sales-per-share figure by the stock price. So if the same company had a stock price of £20, its sales-to-stock-price ratio would be 0.5.

It is a good idea to compare this ratio to other ratios in the industry. As sales increase, so the sales-to-stock price ratio increases, setting off a further increase in the stock price.