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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. National Oilwell Varco Inc's revenue per share for the trailing twelve months (TTM) ended in Dec. 2016 was $19.312. National Oilwell Varco Inc's 10-Year median P/S ratio is 1.53. Therefore, the Median P/S Value for today is $29.55.
As of today, National Oilwell Varco Inc's share price is $38.46. National Oilwell Varco Inc's median P/S value is $29.55. Therefore, National Oilwell Varco Inc's Price to Median P/S Value Ratio for today is 1.30.
During the past 13 years, the highest Price to Median P/S Value Ratio of National Oilwell Varco Inc was 1.65. The lowest was 0.27. And the median was 0.86.
National Oilwell Varco 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 1.53.
National Oilwell Varco Inc's revenue per share for the trailing twelve months (TTM) ended in Dec. 2016 was 5.837 (Mar. 2016 ) + 4.597 (Jun. 2016 ) + 4.378 (Sep. 2016 ) + 4.5 (Dec. 2016 ) = $19.312.
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.
National Oilwell Varco 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|
National Oilwell Varco Inc Annual Data
National Oilwell Varco Inc Quarterly Data