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What Are Sales Per Share?

Sales per share is based on the number of common shares outstanding.
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  • Written By: C. Mitchell
  • Edited By: John Allen
  • Last Modified Date: 09 August 2014
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“Sales per share,” also sometimes called “revenue per share,” is a financial term used in the corporate world to describe the relationship between a company’s annual sales numbers and its outstanding shares of stock. Calculating sales per share is usually as simple as dividing total annual sales or revenue by the number of stock shares held by members of the public. The result is essentially the amount by which stock shares have increased in worth over the year, though the calculation is valuable for far more than just investors. Sales per share on an industry or economy-wide basis is often a tool that analysts use to predict market trends, strengths, and weaknesses.

Many companies sell shares as a way of raising money, particularly when they are first starting out. Shares represent individual slices of ownership. Executives are usually obligated to keep shareholders informed of the company’s performance. One way that performance is gauged is through the sales per share calculation.

Finding a company’s sales per share value begins with an assessment of gross sales or revenue earned. This number is usually taken raw and is not adjusted to account for operating expenses or investment losses. Pure sales numbers are all that are involved.

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The total sales figure is then divided by the total number of outstanding shares. In most cases, the main idea is to pin down how a company is performing in relation to its stock market presence. Companies with many shares outstanding usually have to earn more per share for a high ranking than would a company with fewer shares at play. In this sense, a sales per share calculation is not really a reflection of overall profitability. Rather, it indicates how successfully a company used the resources it already had.

Sales per share is always represented as a single number and is usually reported annually. It is a useful figure for shareholders, as it is a reflection of how much their holdings have increased in value over the fiscal year. The more profitable a company is, the more ownership in it is worth. Revenue per share is also commonly used in the financial industry to rank major players and corporate heavyweights.

A number of different accounting and market analyst firms publish compendiums of corporate performance based on revenue per share figures. Sometimes this is done as a broad indicator of economic health across the board, comparing and contrasting all companies over a certain size within a defined country or locality and charting progress both in the present and over a span of years. Other times, companies are ranked only against others in comparable industry groups, as a way of ranking competitors. Ratios built off of sales and shares often speak loudly to a number of important fiscal benchmarks. No numeric figure can provide a fully accurate picture of success or failure, however.

Companies can sometimes seek to boost their revenue per share in a given period by floating sales or carrying a backlog from one year to the next. This is usually an attempt to create a more weighted average. So long as the sales are legitimate, such a calculation is often permitted, though the practice is usually frowned upon. Analysts are generally looking for a true assessment of yearly sales, not a reading of how good corporate accountants are at manipulating the books and shielding assets from year to year. A sales per share report is only ever as accurate as were the numbers that went into it.

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