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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. Morningstar Inc's revenue per share for the trailing twelve months (TTM) ended in Sep. 2016 was $18.114. Morningstar Inc's 10-Year median P/S ratio is 4.84. Therefore, the Median P/S Value for today is $87.67.
As of today, Morningstar Inc's share price is $74.90. Morningstar Inc's median P/S value is $87.67. Therefore, Morningstar Inc's Price to Median P/S Value Ratio for today is 0.85.
During the past 13 years, the highest Price to Median P/S Value Ratio of Morningstar Inc was 1.77. The lowest was 0.70. And the median was 1.04.
Morningstar 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 4.84.
Morningstar Inc's revenue per share for the trailing twelve months (TTM) ended in Sep. 2016 was 4.551 (Dec. 2015 ) + 4.457 (Mar. 2016 ) + 4.577 (Jun. 2016 ) + 4.529 (Sep. 2016 ) = $18.114.
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.
Morningstar 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|
Morningstar Inc Annual Data
Morningstar Inc Quarterly Data