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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. Targa Resources Corp's revenue per share for the trailing twelve months (TTM) ended in Dec. 2013 was $155.8. Targa Resources Corp's 10-Year median P/S ratio is 0.28. Therefore, the Median P/S Value for today is $43.62.
As of today, Targa Resources Corp's share price is $109.33. Targa Resources Corp's median P/S value is $43.62. Therefore, Targa Resources Corp's Price to Median P/S Value Ratio for today is 2.50.
During the past 6 years, the highest Price to Median P/S Value Ratio of Targa Resources Corp was 2.02. The lowest was 0.08. And the median was 1.10.
Targa Resources 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 0.28.
Targa Resources Corp's revenue per share for the trailing twelve months (TTM) ended in Dec. 2013 was 33.28 (Mar. 2013 ) + 34.24 (Jun. 2013 ) + 36.98 (Sep. 2013 ) + 51.3 (Dec. 2013 ) = $155.8.
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.
Targa Resources 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|
Targa Resources Corp Annual Data
Targa Resources Corp Quarterly Data