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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. HP Inc's revenue per share for the trailing twelve months (TTM) ended in Jan. 2016 was $48.596. HP Inc's 10-Year median P/S ratio is 0.34. Therefore, the Median P/S Value for today is $16.52.
As of today, HP Inc's share price is $13.17. HP Inc's median P/S value is $16.52. Therefore, HP Inc's Price to Median P/S Value Ratio for today is 0.80.
During the past 13 years, the highest Price to Median P/S Value Ratio of HP Inc was 3.25. The lowest was 0.30. And the median was 1.22.
HP 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 0.34.
HP Inc's revenue per share for the trailing twelve months (TTM) ended in Jan. 2016 was 13.863 (Apr. 2015 ) + 13.867 (Jul. 2015 ) + 14.005 (Oct. 2015 ) + 6.861 (Jan. 2016 ) = $48.596.
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.
HP 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|
HP Inc Annual Data
HP Inc Quarterly Data