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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. Toro Co's revenue per share for the trailing twelve months (TTM) ended in Jul. 2015 was $40.79. Toro Co's 10-Year median P/S ratio is 1.16. Therefore, the Median P/S Value for today is $47.32.
As of today, Toro Co's share price is $77.07. Toro Co's median P/S value is $47.32. Therefore, Toro Co's Price to Median P/S Value Ratio for today is 1.63.
During the past 13 years, the highest Price to Median P/S Value Ratio of Toro Co was 1.57. The lowest was 0.23. And the median was 0.79.
Toro Co'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 1.16.
Toro Co's revenue per share for the trailing twelve months (TTM) ended in Jul. 2015 was 7.25 (Oct. 2014 ) + 8.28 (Jan. 2015 ) + 14.48 (Apr. 2015 ) + 10.78 (Jul. 2015 ) = $40.79.
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.
Toro Co'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|
Toro Co Annual Data
Toro Co Quarterly Data