Revenue Per Share

Revenue Per Share (also known as Sales Per Share or RPS) is a financial yardstick that measures a company's total sales on a per-share basis. Think of it this way: if a company were a pizza, its Total Revenue would be the whole pie, and the Shares Outstanding would be the number of slices it's cut into. Revenue Per Share tells you the size of your slice of the sales pie. It’s calculated with a simple formula: Total Revenue / Shares Outstanding. Unlike its more famous cousin, Earnings Per Share (EPS), RPS is a “top-line” metric, meaning it focuses on the raw sales figures before any costs, accounting adjustments, or taxes are taken out. For followers of Value Investing, this makes it a wonderfully raw and honest indicator of a company's ability to generate business. It's much harder for a company to “fudge” its sales numbers than it is to creatively manage its earnings.

RPS is a powerful tool in an investor's kit for several key reasons. It offers a clear, unvarnished look at a company's growth and health.

• Bold: It's a Pure Growth Indicator. A company can boost its EPS through financial engineering like Share Buybacks (reducing the number of shares) or by aggressively cutting costs. But to grow Revenue Per Share, a company must do something more fundamental: sell more of its products or services. A consistently rising RPS is a strong sign of a healthy, growing business with strong customer demand.
• Bold: It's a Sanity Check for Earnings. If you see a company's EPS climbing year after year, but its RPS is flat or falling, you should be suspicious. It might mean the profit growth isn't coming from a stronger core business but from temporary measures. A healthy company grows both its sales and its profits over the long term.
• Bold: It's a Key Valuation Component. RPS is the “S” in the Price-to-Sales Ratio (P/S Ratio), a valuation metric beloved by many great investors. The P/S ratio (Stock Price / Revenue Per Share) helps you gauge how much you're paying for each dollar of a company's sales. It's especially useful for analyzing companies that aren't yet profitable, such as young tech firms or businesses in cyclical slumps.

Looking at a single RPS number is like seeing one frame of a movie—it doesn't tell you the story. To use it effectively, you need to add context.

The real magic of RPS is in its trend. Pull up a company's financial data for the last 5 to 10 years (you can usually find this in their annual reports).

• Is the RPS on a steady upward climb? Excellent. This suggests a durable business that is consistently finding new ways to grow.
• Is it bumpy, stagnant, or declining? This is a red flag. You need to dig deeper to understand why the company is struggling to increase its sales per share.

How does the company's RPS stack up against its direct competitors?

• A company with a higher RPS than its rivals might be a market leader with a more dominant position.
• A company with a faster-growing RPS is likely gaining Market Share, which is a fantastic sign of a strong competitive advantage.

Share Dilution is the arch-nemesis of the per-share investor. A company might be growing its total revenue, but if it's constantly issuing new stock (for acquisitions or to pay employees), your slice of the pie gets smaller. This causes RPS to stagnate or even fall, even while the headline revenue number looks good. Always check the trend in the number of shares outstanding, which you can find on the Income Statement or Balance Sheet. Growing revenue is good, but if it comes at the cost of heavily diluting existing shareholders, it's not a victory for you.

While incredibly useful, RPS is not a silver bullet. It's a blunt instrument that must be used with other tools.

• Bold: It Says Nothing About Profitability. This is the big one. A company can have skyrocketing RPS and still be losing a fortune on every sale. High revenue is meaningless if it never translates into actual profit. Always check profitability metrics like Gross Margin, Operating Margin, and Net Income to see if those impressive sales are actually making money.
• Bold: Industry Context is Everything. Comparing the RPS of a high-volume, low-margin retailer like Costco with a high-margin software company like Microsoft is a pointless exercise. Their business models are fundamentally different. Always compare apples to apples within the same industry.