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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. Nike Inc's revenue per share for the trailing twelve months (TTM) ended in Feb. 2016 was $18.204. Nike Inc's 10-Year median P/S ratio is 1.93. Therefore, the Median P/S Value for today is $35.13.
As of today, Nike Inc's share price is $52.59. Nike Inc's median P/S value is $35.13. Therefore, Nike Inc's Price to Median P/S Value Ratio for today is 1.49.
During the past 13 years, the highest Price to Median P/S Value Ratio of Nike Inc was 1.92. The lowest was 0.47. And the median was 0.87.
Nike 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 1.93.
Nike Inc's revenue per share for the trailing twelve months (TTM) ended in Feb. 2016 was 4.398 (May. 2015 ) + 4.795 (Aug. 2015 ) + 4.388 (Nov. 2015 ) + 4.623 (Feb. 2016 ) = $18.204.
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.
Nike 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|
Nike Inc Annual Data
Nike Inc Quarterly Data