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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. Rio Tinto PLC's revenue per share for the trailing twelve months (TTM) ended in Jun. 2016 was $19.088. Rio Tinto PLC's 10-Year median P/S ratio is 1.95. Therefore, the Median P/S Value for today is $30.42.
As of today, Rio Tinto PLC's share price is $32.42. Rio Tinto PLC's median P/S value is $30.42. Therefore, Rio Tinto PLC'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 Rio Tinto PLC was 1.97. The lowest was 0.00. And the median was 0.97.
Rio Tinto PLC'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 1.95.
For company reported semi-annually, GuruFocus uses latest annual data as the TTM data. Rio Tinto PLC's revenue per share for the trailing twelve months (TTM) ended in Jun. 2016 was $19.088.
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.
Rio Tinto PLC'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|
Rio Tinto PLC Annual Data
Rio Tinto PLC Semi-Annual Data