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This valuation method assumes that the stock valuation will revert to its historical mean in terms of Price/Sales Ratio. The reason we use P/S Ratio instead of P/E Ratio or P/B Ratio is because Price/Sales Ratio is independent of profit margin, and can be applied to a broader range of situations.
Median P/S Value is calculated as trailing twelve months (TTM) revenue per share times 10-Year median P/S ratio. Best Buy Co Inc's revenue per share for the trailing twelve months (TTM) ended in Apr. 2014 was $120.14. Best Buy Co Inc's 10-Year median P/S ratio is 0.41. Therefore, the Median P/S Value for today is $48.66.
As of today, Best Buy Co Inc's share price is $30.93. Best Buy Co Inc's median P/S value is $48.66. Therefore, Best Buy Co Inc's Price to Median P/S Value Ratio for today is 0.60.
During the past 13 years, the highest Price to Median P/S Value Ratio of Best Buy Co Inc was 3.40. The lowest was 0.07. And the median was 1.10.
Best Buy Co Inc's Median P/S Value for today is calculated as
|Median P/S Value||=||Total Annual Sales / Shares Outstanding||*||10-Year Median P/S Ratio|
|=||Revenue per Share (TTM)||*||10-Year Median P/S Ratio|
10-Year Median P/S Ratio is 0.41.
Best Buy Co Inc's revenue per share for the trailing twelve months (TTM) ended in Apr. 2014 was 27 (Jul. 2013 ) + 26.83 (Oct. 2013 ) + 40.53 (Jan. 2014 ) + 25.78 (Apr. 2014 ) = $120.14.
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.
Best Buy Co Inc's Price to Median P/S Value Ratio for today is calculated as
|Price to Median P/S Value||=||Share Price||/||Median P/S Value|
Best Buy Co Inc Annual Data
Best Buy Co Inc Quarterly Data