Affluence Corp (AFFU)

[RichieBoy]

To find the required annual revenues for a company with a share price (sp) of $2 and a market cap of approximately $5 billion, use the Price-to-Sales (P/S) ratio formula:

P/S Ratio
=
Market Cap
Annual Revenue
P/S Ratio=
Annual Revenue
Market Cap

Rearrange to solve for annual revenue:

Annual Revenue
=
Market Cap
P/S Ratio
Annual Revenue=
P/S Ratio
Market Cap

If you want to know the revenue that would justify a $5 billion market cap at a $2 share price, you need to know the typical P/S ratio for the industry or company. However, if you just want the revenue that would make the P/S ratio exactly 1 (i.e., market cap equals annual revenue):

Annual Revenue
=
$
5
?
billion
Annual Revenue=$5billion
If the company trades at a higher P/S ratio (for example, 2), then:

Annual Revenue
=
$
5
?
billion
2
=
$
2.5
?
billion
Annual Revenue=
2
$5billion
=$2.5billion
So, for a $5 billion market cap:

At P/S = 1, annual revenue = $5 billion

At P/S = 2, annual revenue = $2.5 billion

At P/S = 5, annual revenue = $1 billion

You can adjust this calculation based on the typical P/S ratio for the sector.