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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. Li & Fung Ltd.'s revenue per share for the trailing twelve months (TTM) ended in Dec. 2013 was $2.48. Li & Fung Ltd.'s 10-Year median P/S ratio is 0.61. Therefore, the Median P/S Value for today is $1.49.
As of today, Li & Fung Ltd.'s share price is $1.57. Li & Fung Ltd.'s median P/S value is $1.49. Therefore, Li & Fung Ltd.'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 Li & Fung Ltd. was 1.22. The lowest was 1.16. And the median was 1.20.
Li & Fung Ltd.'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 0.61.
For company reported semi-annually, GuruFocus uses latest annual data as the TTM data. Li & Fung Ltd.'s revenue per share for the trailing twelve months (TTM) ended in Dec. 2013 was $2.48.
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.
Li & Fung Ltd.'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|
Li & Fung Ltd. Annual Data
Li & Fung Ltd. Semi-Annual Data