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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. Pier 1 Imports Inc's revenue per share for the trailing twelve months (TTM) ended in Aug. 2014 was $18.28. Pier 1 Imports Inc's 10-Year median P/S ratio is 0.70. Therefore, the Median P/S Value for today is $12.80.
As of today, Pier 1 Imports Inc's share price is $13.75. Pier 1 Imports Inc's median P/S value is $12.80. Therefore, Pier 1 Imports Inc's Price to Median P/S Value Ratio for today is 1.07.
During the past 13 years, the highest Price to Median P/S Value Ratio of Pier 1 Imports Inc was 2.55. The lowest was 0.02. And the median was 1.20.
Pier 1 Imports 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 0.70.
Pier 1 Imports Inc's revenue per share for the trailing twelve months (TTM) ended in Aug. 2014 was 4.44 (Nov. 2013 ) + 4.95 (Feb. 2014 ) + 4.37 (May. 2014 ) + 4.52 (Aug. 2014 ) = $18.28.
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.
Pier 1 Imports 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|
Pier 1 Imports Inc Annual Data
Pier 1 Imports Inc Quarterly Data