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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. The Hershey Co's revenue per share for the trailing twelve months (TTM) ended in Sep. 2014 was $32.62. The Hershey Co's 10-Year median P/S ratio is 2.61. Therefore, the Median P/S Value for today is $85.14.
As of today, The Hershey Co's share price is $108.62. The Hershey Co's median P/S value is $85.14. Therefore, The Hershey Co's Price to Median P/S Value Ratio for today is 1.27.
During the past 13 years, the highest Price to Median P/S Value Ratio of The Hershey Co was 1.47. The lowest was 0.49. And the median was 0.86.
The Hershey 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 2.61.
The Hershey Co's revenue per share for the trailing twelve months (TTM) ended in Sep. 2014 was 8.6 (Dec. 2013 ) + 8.24 (Mar. 2014 ) + 7.02 (Jun. 2014 ) + 8.76 (Sep. 2014 ) = $32.62.
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.
The Hershey 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|
The Hershey Co Annual Data
The Hershey Co Quarterly Data