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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. Penn West Petroleum Ltd's revenue per share for the trailing twelve months (TTM) ended in Dec. 2014 was $4.47. Penn West Petroleum Ltd's 10-Year median P/S ratio is 2.63. Therefore, the Median P/S Value for today is $10.60.
As of today, Penn West Petroleum Ltd's share price is $2.41. Penn West Petroleum Ltd's median P/S value is $10.60. Therefore, Penn West Petroleum Ltd's Price to Median P/S Value Ratio for today is 0.20.
During the past 13 years, the highest Price to Median P/S Value Ratio of Penn West Petroleum Ltd was 1.59. The lowest was 0.19. And the median was 0.99.
Penn West Petroleum Ltd'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 2.63.
Penn West Petroleum Ltd's revenue per share for the trailing twelve months (TTM) ended in Dec. 2014 was 1.16 (Mar. 2014 ) + 1.29 (Jun. 2014 ) + 1.12 (Sep. 2014 ) + 0.9 (Dec. 2014 ) = $4.47.
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.
Penn West Petroleum Ltd'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|
Penn West Petroleum Ltd Annual Data
Penn West Petroleum Ltd Quarterly Data