Bulgarian SOFIX Levels in 2017 According to The “Price-to-Sales” and “Enterprise Value-to-Sales” Ratios

Abstract

This paper is focused on the “price-to-sales ratio” (P/S) and the “enterprise value-to-sales ratio” (EV/S), which can be used in relative valuation, in the analysis of companies’ performance, as well as in the analysis of different sectors and of the market as a whole. The advantages and drawbacks of the market ratios are analyzed in brief. The derivation of the fundamental “price-to-sales” (P/S) and the “enterprise value-to-sales”(EV/S) ratios is discussed in detail. The two fundamental P/S and EV/S ratios for the Bulgarian stock market are calculated and compared with the corresponding actual P/S and EV/S. The results of the study indicate that the current levels of the actual P/S and EV/S are much higher than the levels suggested by fundamentals, which is an indicator for an overpriced Bulgarian stock market in 2017.