Ken Fisher and the Price to Sales (P/S) Ratio
American stock investment expert Kenneth Fisher is the youngest son of Philip A. Fisher, another investment legend on our platform, who has authored three books, most notably “Common Stocks and Uncommon Profits”. After studying forestry Kenneth worked for his father and subsequently started his own company, Fisher Investments, in 1979 at the age of 29 where he is CEO and Co-Chief Investment Officer.
Pioneering a New Ratio
Ken Fisher pioneered the theoretical work of an investment analysis tool called the Price-to-Sales (P/S) Ratio, which now makes up a core part of a complete financial curriculum. Whereas previous research hinted that the price-to-book (P/B) ratio was superior to the price-earnings ratio in selecting undervalued stocks, other research indicated that using price-to-sales ratios may lead to better investment results than P/B ratios or P/E ratios.
P/S levels are tied to expectations of future company growth, profitability, and risk. The higher the expected growth, the higher the P/S ratio a stock can support. P/S ratios do not generally work very well with financial firms such as banks, where sales is not a key driving force.
Kenneth Fisher’s Background and Credentials
Kenneth started his studies in forestry at Humboldt State University, but graduated with a degree in economics in 1972. He is perhaps best known for his prestigious Forbes “Portfolio Strategy” column, which has been published and making market calls for 30 years, making him the third-longest running columnist in Forbes history. From 1984 through 2012 Ken wrote 10 books, including four New York Times bestsellers.
→ Read more about Kenneth Fisher’s investing strategy on meetinvest and see how a portfolio would have performed using his strategy.