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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. Waters Corp's revenue per share for the trailing twelve months (TTM) ended in Mar. 2014 was €16.32. Waters Corp's 10-Year median P/S ratio is 4.31. Therefore, the Median P/S Value for today is €70.34.
As of today, Waters Corp's share price is €78.67. Waters Corp's median P/S value is €70.34. Therefore, Waters Corp's Price to Median P/S Value Ratio for today is 1.10.
During the past 13 years, the highest Price to Median P/S Value Ratio of Waters Corp was 3.65. The lowest was 0.14. And the median was 0.98.
Waters 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 4.31.
Waters Corp's revenue per share for the trailing twelve months (TTM) ended in Mar. 2014 was 3.98 (Jun. 2013 ) + 3.88 (Sep. 2013 ) + 4.83 (Dec. 2013 ) + 3.63 (Mar. 2014 ) = €16.32.
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
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.
Waters 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|
Waters Corp Annual Data
Waters Corp Quarterly Data