A Top-Line Approach: The Price-to-Sales Ratio Screen

    by Wayne A. Thorp

    Ken Fisher first popularized the strategy of selecting stocks based on price-to-sales ratios in his 1984 book, “Super Stocks.”

    However, price-to-sales ratios (current stock price divided by sales per share for the last 12 months) truly came into their own during the dot-com era, as investors sought ways to value companies whose negative earnings made earnings-based models useless.

    Several years after the bursting of the Internet bubble, price-to-sales ratios continue to be a useful stock selection methodology.

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