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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. Dollar Tree Stores Inc's revenue per share for the trailing twelve months (TTM) ended in Oct. 2014 was $40.28. Dollar Tree Stores Inc's 10-Year median P/S ratio is 1.02. Therefore, the Median P/S Value for today is $41.09.
As of today, Dollar Tree Stores Inc's share price is $79.68. Dollar Tree Stores Inc's median P/S value is $41.09. Therefore, Dollar Tree Stores Inc's Price to Median P/S Value Ratio for today is 1.93.
During the past 13 years, the highest Price to Median P/S Value Ratio of Dollar Tree Stores Inc was 3.15. The lowest was 0.62. And the median was 1.29.
Dollar Tree Stores 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 1.02.
Dollar Tree Stores Inc's revenue per share for the trailing twelve months (TTM) ended in Oct. 2014 was 10.68 (Jan. 2014 ) + 9.63 (Apr. 2014 ) + 9.83 (Jul. 2014 ) + 10.14 (Oct. 2014 ) = $40.28.
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.
Dollar Tree Stores 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|
Dollar Tree Stores Inc Annual Data
Dollar Tree Stores Inc Quarterly Data