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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. Union Pacific Corp's revenue per share for the trailing twelve months (TTM) ended in Jun. 2016 was $23.795. Union Pacific Corp's 10-Year median P/S ratio is 2.61. Therefore, the Median P/S Value for today is $62.10.
As of today, Union Pacific Corp's share price is $92.76. Union Pacific Corp's median P/S value is $62.10. Therefore, Union Pacific Corp's Price to Median P/S Value Ratio for today is 1.48.
During the past 13 years, the highest Price to Median P/S Value Ratio of Union Pacific Corp was 1.72. The lowest was 0.33. And the median was 0.65.
Union Pacific 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 2.61.
Union Pacific Corp's revenue per share for the trailing twelve months (TTM) ended in Jun. 2016 was 6.424 (Sep. 2015 ) + 5.99 (Dec. 2015 ) + 5.703 (Mar. 2016 ) + 5.678 (Jun. 2016 ) = $23.795.
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.
Union Pacific 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|
Union Pacific Corp Annual Data
Union Pacific Corp Quarterly Data