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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. 3M Co's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was $46.4. 3M Co's 10-Year median P/S ratio is 2.51. Therefore, the Median P/S Value for today is $116.46.
As of today, 3M Co's share price is $144.11. 3M Co's median P/S value is $116.46. Therefore, 3M Co's Price to Median P/S Value Ratio for today is 1.23.
During the past 13 years, the highest Price to Median P/S Value Ratio of 3M Co was 1.49. The lowest was 0.57. And the median was 0.98.
3M 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 2.51.
3M Co's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was 11.44 (Sep. 2013 ) + 11.11 (Dec. 2013 ) + 11.61 (Mar. 2014 ) + 12.24 (Jun. 2014 ) = $46.4.
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.
3M 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|
3M Co Annual Data
3M Co Quarterly Data