Investment in stocks after analyzing valuation metrics is considered one of the best practices. When considering valuation metrics, the price-to-earnings ratio has always been the obvious choice. This is because calculations based on earnings are easy and come in handy. However, the price-to-sales ratio is convenient for determining the value of stocks that are incurring losses or in an early development cycle, generating meager or no profit. What's the Price-to-Sales Ratio? While a loss-making company with a negative price-to-earnings ratio falls out of investor favor, its price-to-sales can indicate the hidden strength of the business. This underrated ratio is also used to identify a recovery situation or ensure a company's growth is not overvalued. A stock's price-to-sales ratio reflects how much investors pay for each dollar of revenue generated by a company. If the price-to-sales ratio is 1, investors are paying $1 for every $1 of revenues generated by the company. A stock with a price-to-sales below 1 is a good bargain as investors need to pay less than a dollar for a dollar's worth.   Thus, a stock with a lower price-to-sales ratio is a more suitable investment than a stock with a high price-to-sales ratio. The price-to-sales ratio is often preferred over price-to-earnings, as companies can manipulate their earnings using various accounting measures. However, sales are harder to manipulate and are relatively reliable. However, one should keep in mind that a company with a high debt and a low price-to-sales ratio is not an ideal choice. The high debt level will have to be paid off at some point, leading to further share issuance, a rise in market cap, and, ultimately, a higher price-to-sales ratio. In any case, the price-to-sales ratio used in isolation cannot do the trick. One should analyze other ratios like Price/Earnings, Price/Book and Debt/Equity before arriving at any investment decision. Lakeland Industries (NASDAQ: LAKE), The ODP Corporation (NASDAQ: ODP), ProPetro Holding Corp. (NYSE: PUMP), Barrett Business Services (NASDAQ: BBSI) and JAKKS Pacific (NASDAQ: JAKK) are some companies with a low price-to-sales ratio and the potential to offer higher returns. Screening Parameters Price to Sales less than the Median Price to Sales for its Industry: The lower the price-to-sales ratio, the better. Price to Earnings using ...