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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. Splunk Inc's revenue per share for the trailing twelve months (TTM) ended in Oct. 2016 was USD 6.567. Splunk Inc's 10-Year median P/S ratio is 13.46. Therefore, the Median P/S Value for today is USD 88.39.
As of today, Splunk Inc's share price is USD 53.94. Splunk Inc's median P/S value is USD 88.39. Therefore, Splunk Inc's Price to Median P/S Value Ratio for today is 0.61.
During the past 7 years, the highest Price to Median P/S Value Ratio of Splunk Inc was 1.97. The lowest was 0.41. And the median was 1.01.
Splunk 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 13.46.
Splunk Inc's revenue per share for the trailing twelve months (TTM) ended in Oct. 2016 was 1.736 (Jan. 2016 ) + 1.414 (Apr. 2016 ) + 1.599 (Jul. 2016 ) + 1.818 (Oct. 2016 ) = USD 6.567.
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.
Splunk 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|
Splunk Inc Annual Data
Splunk Inc Quarterly Data
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