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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. Sears Holdings Corp's revenue per share for the trailing twelve months (TTM) ended in Oct. 2014 was $298.5. Sears Holdings Corp's 10-Year median P/S ratio is 0.15. Therefore, the Median P/S Value for today is $44.78.
As of today, Sears Holdings Corp's share price is $38.86. Sears Holdings Corp's median P/S value is $44.78. Therefore, Sears Holdings Corp's Price to Median P/S Value Ratio for today is 0.86.
During the past 11 years, the highest Price to Median P/S Value Ratio of Sears Holdings Corp was 3.12. The lowest was 0.54. And the median was 0.98.
Sears Holdings 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 0.15.
Sears Holdings Corp's revenue per share for the trailing twelve months (TTM) ended in Oct. 2014 was 93.97 (Jan. 2014 ) + 69.83 (Apr. 2014 ) + 70.95 (Jul. 2014 ) + 63.75 (Oct. 2014 ) = $298.5.
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.
Sears Holdings 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|
Sears Holdings Corp Annual Data
Sears Holdings Corp Quarterly Data