Definition
Median P/S Value is calculated as follows:
Median P/S Value = Total Annual Sales / Shares Outstanding * 10YearMedianPS Ratio.
Explanation
This valuation method assumes that the stock valuation will revert to its historical mean in terms of Price/Sales Ratio. The reason we use
Price/Sales Ratio instead of
Price/Earnings Ratio or
Price/Book Ratio is because Price/Sales Ratio is independent of profit margin, and can be applied to a broader range of situations.
It also assumes that over time the profit margin is constant. If a company increases its profit margin to a sustainable level, this value might under-estimate its value. If it has permanent declined profit margins, this may over-estimate the companys value.
Related Terms
Price/Sales Ratio,
Price/Earnings Ratio,
Price/Book Ratio,
Intrinsic Value (DCF Projected),
Intrinsic Value (DCF),
Intrinsic Value (DE),
Graham Number,
GAVA* All numbers are in millions except for per share dataApollo Group Inc Annual Data
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Apollo Group Inc Quarterly Data
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