The price/sales ratio is a tool that investors can use when valuing a stock. The trick is knowing when the price/sales ratio will tell you something and when the ratio is unlikely to help you. The price/sales ratio is great for valuing a stock relative to its own price and valuation history. The ratio is also a great tool for evaulating similar companies inside the same sector or industry. 
The price/sales ratio is found by either taking the share price of the stock and dividing that number by the revenue per share, or alternatively you can also divide the company's market cap by the company's revenue in the most recent fiscal year.
As with any valuation ratio there are positives and negatives to using this ratio. One huge positive is that since sales are so difficult to manipulate compared to earnings, the price/sales ratio can actually be a more accurate picture of a company's performance than the price/earnings ratio. A negative for using the price/sales ratio is that this ratio will vary a huge amount from industry to industry. The ideal time to use the price/sales ratio is when you are comparing stocks from the same sector such as GOOG and YHOO.
The price/sales ratio is a great tool to use in conjunction with other valuation factors such as the p/e ratio, the PEG ratio, and the price/book ratio. Add this ratio to your list when valuing your next potential stock pick!
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