What is Shopify’s price to sales ratio?
Shopify’s price to sales ratio is a measure of the company’s value relative to its revenue. In other words, it shows how much investors are willing to pay for each dollar of Shopify’s sales.
The ratio is calculated by dividing Shopify’s market capitalization by its annual sales. As of June 2019, Shopify’s market cap was $19.8 billion and its annual sales were $1.07 billion, giving it a price to sales ratio of 18.5.
This means that investors are willing to pay $18.50 for each dollar of Shopify’s sales. Comparatively, the average price to sales ratio for tech companies is 7.1, so Shopify is seen as being significantly more valuable than its peers.
PRO TIP: The Shopify price to sales ratio is a financial metric used to measure the relative value of a company’s stock price to its revenue per share. While this metric can be useful in determining whether a company is under or overvalued, it is important to remember that it is only one factor to consider when making investment decisions.
There are a few possible explanations for why Shopify’s price to sales ratio is so high. Firstly, the company is growing rapidly and its sales are expected to more than double in 2019. This potential for future growth is reflected in its high valuation.
Secondly, Shopify operates in a niche market with few direct competitors. This gives it a relatively high degree of market power, which again is reflected in its valuation.
Finally, Shopify has a strong brand and is widely considered to be the leading ecommerce platform for small and medium businesses. This brand equity also contributes to its high valuation.
In conclusion, Shopify’s high price to sales ratio reflects the company’s strong growth potential, market power, and brand equity.
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Shopify is a Canadian e-commerce company headquartered in Ottawa, Ontario. It is also the name of its proprietary e-commerce platform for online stores and retail point-of-sale systems. Shopify offers online retailers a suite of services “including payments, marketing, shipping and customer engagement tools to simplify the process of running an online store for small merchants. ”
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