In the original edition of 'What works on Wall Street', O'Shaughnessy wrote that the single-best value factor was a company's price-to-sales ratio (P/S). In his latest edition the P/S continues to perform well, but it was unseated by the value composites and EBITDA/EV due to 2 reasons: (1) A broader scope of analysis by using deciles and (2) two very bad years for P/S, e.g. 2007 and 2008.
A stock's P/S is similar to its P/E ratio, but it measures the price of the company against its annual sales instead of earnings.
It's calculated as follows:
In the scorecard, we show the P/S for the selected stock. We also calculate the median P/S for all stocks, the company's sector, industry group, and industry. Finally, we include the percentile so you can easily compare a company to its peers. For more information, click here.
In our screens:
O'Shaughnessy Trending ValueIn the fourth edition of his bestselling value quant book 'What works on Wall Street', James O'Shaughnessy devised anew screen which is called "the top stock-market strategy of the past 50 years".. more...
In our scorecard manual:
Value FactorsA company can be cheap overall, but how does it compare to the selected stock universe and its peers?. more...