Price to Pre-Tax Profit per share ratio, is defined as the company's market capitalisation divided by the pre-tax profit. Pre-tax profit is operating profit minus interest and any other non-operating expenses (except taxes).
The formula is as follows: Market cap. / Pre tax profit (TTM).
This ratio is calculated on a TTM basis - see here for more explanation as to why we prefer TTM ratios.
This is something of a half-way house between the EV/EBITDA and Price-Earnings ratios. The argument in its favour is that it eliminates the distortion from different corporate tax structures on earnings. However, even this seems debatable as it fails to fully eliminating the impact of debt / capital structure by using the Enterprise Value.
This ratio was popularised in the "Naked Trader" book.
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