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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. Sturm Ruger & Company's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was $33.89. Sturm Ruger & Company's 10-Year median P/S ratio is 1.59. Therefore, the Median P/S Value for today is $53.89.
As of today, Sturm Ruger & Company's share price is $50.78. Sturm Ruger & Company's median P/S value is $53.89. Therefore, Sturm Ruger & Company's Price to Median P/S Value Ratio for today is 0.93.
During the past 13 years, the highest Price to Median P/S Value Ratio of Sturm Ruger & Company was 1.99. The lowest was 0.41. And the median was 1.04.
Sturm Ruger & Company'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 1.59.
Sturm Ruger & Company's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was 8.57 (Sep. 2013 ) + 9.08 (Dec. 2013 ) + 8.54 (Mar. 2014 ) + 7.7 (Jun. 2014 ) = $33.89.
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.
Sturm Ruger & Company'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|
Sturm Ruger & Company Annual Data
Sturm Ruger & Company Quarterly Data