The Value of the Price to Sales Ratio (PSR)

By on January 24, 2010

John Reese of Validea.com has written an article touting the PSR in valuing stocks. The PSR is less prone to fluctuation than the more widely followed price/earnings ratio (PE). Kenneth Fisher was the pioneer of the PSR, while James O’Shaughnessy popularized it in his book What Works on Wall Street.

SMA Comment: 10 months ago when the market hit bottom it was common to hear from pundits that stocks weren’t bargains because the PE had skyrocketed. This wrongheaded thinking caused many investors to dump their stocks near the bottom of the cycle.

Source: The Globe and Mail
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