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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. Eastman Chemical Co's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was $60.81. Eastman Chemical Co's 10-Year median P/S ratio is 0.82. Therefore, the Median P/S Value for today is $49.86.
As of today, Eastman Chemical Co's share price is $80.89. Eastman Chemical Co's median P/S value is $49.86. Therefore, Eastman Chemical Co's Price to Median P/S Value Ratio for today is 1.64.
During the past 13 years, the highest Price to Median P/S Value Ratio of Eastman Chemical Co was 1.75. The lowest was 0.40. And the median was 0.95.
Eastman Chemical Co'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 0.82.
Eastman Chemical Co's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was 14.95 (Sep. 2013 ) + 14.53 (Dec. 2013 ) + 15.07 (Mar. 2014 ) + 16.26 (Jun. 2014 ) = $60.81.
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.
Eastman Chemical Co'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|
Eastman Chemical Co Annual Data
Eastman Chemical Co Quarterly Data