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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. Chevron Corp's revenue per share for the trailing twelve months (TTM) ended in Dec. 2015 was $73.845. Chevron Corp's 10-Year median P/S ratio is 0.86. Therefore, the Median P/S Value for today is $63.51.
As of today, Chevron Corp's share price is $100.59. Chevron Corp's median P/S value is $63.51. Therefore, Chevron Corp's Price to Median P/S Value Ratio for today is 1.58.
During the past 13 years, the highest Price to Median P/S Value Ratio of Chevron Corp was 2.39. The lowest was 0.61. And the median was 0.96.
Chevron Corp'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 0.86.
Chevron Corp's revenue per share for the trailing twelve months (TTM) ended in Dec. 2015 was 18.416 (Mar. 2015 ) + 21.504 (Jun. 2015 ) + 18.327 (Sep. 2015 ) + 15.598 (Dec. 2015 ) = $73.845.
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.
Chevron Corp'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|
Chevron Corp Annual Data
Chevron Corp Quarterly Data