RECENT POSTS
Monday, May 20, 2019
Research Paper: Capex Spending

Thursday, May 16, 2019
Psst: Got Any Weed?

Wednesday, May 15, 2019
Open Letter: SEC Proposed Rule for BDCs

Friday, May 10, 2019
General Motors and Workhorse

Monday, May 6, 2019
How to Find Earnings Release Data

Tuesday, April 23, 2019
Following Restructuring Costs Over Time

Monday, April 22, 2019
Capex Spending: More Than You Might Think

Saturday, April 13, 2019
When AWS Takes Over the World

Thursday, April 11, 2019
Data Trends in Focus: Restructuring Costs

Sunday, April 7, 2019
How One Customer Crushed It With Calcbench

Thursday, April 4, 2019
TJX Shows Complexity of Leasing Costs Reporting

Tuesday, April 2, 2019
CEO Pay Ratios: Some 2018 Thoughts

Wednesday, March 27, 2019
Corporate Spending: Where It Goes, 2017 vs. 2018

Monday, March 25, 2019
Health Insurers: A Bit Winded?

Friday, March 22, 2019
Our New Master Class Video

Thursday, March 21, 2019
Tech Data’s Goodwill Adjustment

Tuesday, March 19, 2019
There’s Taxes, and There’s Taxes

Saturday, March 16, 2019
Adventures in Tax Cuts and Net Income

Monday, March 11, 2019
Big Moves in Goodwill, Intangible Value

Friday, March 8, 2019
CVS, Goodwill, and Enterprise Value

Archive  |  Search:

Financial analysts are always trying to place a company’s valuation into context. Is the business overvalued relative to peers, that you should sell? Undervalued, that you should buy? Is the company’s valuation accelerating or decelerating over time, that whatever decision you reached last year, you may want to revisit now?

Calcbench can help. Let’s do some analysis of our own to show you how it works.

All questions about valuation hinge on a company’s market capitalization. Market cap is, after all, the value that investors place on the company. Calcbench tracks market cap as one of our standardized metrics, so you can find it either on the Company-in-Detail page or the Multi-Company page simply by entering “market cap” into the Search Standardized Metrics text boxes there. (We return the filer’s market cap on the last day of its fiscal year.)

For our analysis, then, we can examine the market cap of the S&P 500 companies for 2014, 2015, and 2016; and how those figures compare to annual revenue for the same years. That gives us a Price-to-Sales (P/S) ratio.

Here is a table of the 10 companies with the largest market caps in 2016, plus their revenue and P/S ratios.

Plain to see that Facebook’s P/S ratio is sky-high compared to all the others. That’s not surprising, given Facebook’s rapid growth in recent years and the market’s usual tendency to fall in love with hot technology stocks. For example, compare Facebook’s valuation to the decidedly unsexy Berkshire Hathaway. Berkshire has almost 10 times as much revenue, but a lower market cap.

Now let’s reshuffle the deck and list those S&P 500 companies with the highest P/S ratios, regardless of revenue and market cap.

That’s quite a different lineup. We have five real estate trusts, plus a self-storage company. But despite their high P/S ratios, the companies have low market cap relative to most companies. What’s going on? Probably investment from mutual funds and asset management funds, looking for the high payouts and stable business models that REITs provide. That pushes up the price and makes the stock relatively expensive, but you get steady earnings in exchange.

Finally, let’s measure the change in P/S ratio from 2014 to 2016, expressed as a percentage. Here are 15 companies with the largest increases in P/S—that is, companies whose valuations are rising at an accelerating rate.

Calcbench users can (and we here will) do much more with valuation analysis based on our data. These are only some simple examples. Look for more comprehensive research in the future.


FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.