Barbee, Mukherji & Raines argue the sales-to-price (S/P) ratio explains the cross-section of returns better than book-to-market or size, and that S/P subsumes the debt-equity effect. Because sales are less distorted by leverage and accounting choices than book value or earnings, S/P is a cleaner value measure.
What anomaly it documents
Predictor: sales-to-price ratio (sales per dollar of market value).
Direction: positive — high S/P (cheap on sales) firms earn higher returns.
Shape: monotone; S/P dominates B/M and size in their sample, and absorbs D/E.
OSAP predictor: SP.
How to construct it
Sorting variable: sales / market value of equity.
Universe: NYSE/AMEX/Nasdaq common stocks.
Portfolio formation: rank into S/P deciles.
Long / short: long high S/P, short low S/P.
Weighting: equal- or value-weighted.
Rebalancing: annual.
Evidence and replication
Period
Notes
Source
IS (1979–1991)
S/P beats B/M and size; absorbs D/E
this paper
OOS (post-1996)
a robust value proxy; overlaps B/M
post-publication
OSAP (SP)
replicates
Chen & Zimmermann 2022
Why it might work
Cleaner value signal: sales resist the leverage/accounting distortions that affect book value and earnings.
Value premium: S/P is another lens on cheapness.
Limitations and risks
Value overlap: correlated with other value measures; modest marginal alpha.
Margin blindness: S/P ignores profitability — high-sales, low-margin firms can be value traps.
Sample-specific: the dominance over B/M may not generalize.
Key references
Barbee, W., Mukherji, S. & Raines, G. (1996) — Do Sales-Price and Debt-Equity Explain Stock Returns Better than Book-Market and Firm Size? — FAJ — DOI: 10.2469/faj.v52.n2.1980
Provenance: generated from the paper's abstract and metadata, not full text; sample periods and replication notes are indicative — verify against the source.
