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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. NorthWestern Corp's revenue per share for the trailing twelve months (TTM) ended in Sep. 2016 was $26.028. NorthWestern Corp's 10-Year median P/S ratio is 1.10. Therefore, the Median P/S Value for today is $28.63.
As of today, NorthWestern Corp's share price is $56.09. NorthWestern Corp's median P/S value is $28.63. Therefore, NorthWestern Corp's Price to Median P/S Value Ratio for today is 1.96.
During the past 13 years, the highest Price to Median P/S Value Ratio of NorthWestern Corp was 6.06. The lowest was 0.59. And the median was 1.04.
NorthWestern Corp'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 1.10.
NorthWestern Corp's revenue per share for the trailing twelve months (TTM) ended in Sep. 2016 was 6.871 (Dec. 2015 ) + 6.879 (Mar. 2016 ) + 6.068 (Jun. 2016 ) + 6.21 (Sep. 2016 ) = $26.028.
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.
NorthWestern Corp'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|
NorthWestern Corp Annual Data
NorthWestern Corp Quarterly Data
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