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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. Cal-Maine Foods Inc's revenue per share for the trailing twelve months (TTM) ended in Aug. 2014 was $61.2. Cal-Maine Foods Inc's 10-Year median P/S ratio is 0.76. Therefore, the Median P/S Value for today is $46.51.
As of today, Cal-Maine Foods Inc's share price is $79.75. Cal-Maine Foods Inc's median P/S value is $46.51. Therefore, Cal-Maine Foods Inc's Price to Median P/S Value Ratio for today is 1.71.
During the past 13 years, the highest Price to Median P/S Value Ratio of Cal-Maine Foods Inc was 1.70. The lowest was 0.13. And the median was 0.69.
Cal-Maine Foods 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 0.76.
Cal-Maine Foods Inc's revenue per share for the trailing twelve months (TTM) ended in Aug. 2014 was 14.68 (Nov. 2013 ) + 16.37 (Feb. 2014 ) + 15.4 (May. 2014 ) + 14.75 (Aug. 2014 ) = $61.2.
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.
Cal-Maine Foods 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|
Cal-Maine Foods Inc Annual Data
Cal-Maine Foods Inc Quarterly Data