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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. United Rentals Inc's revenue per share for the trailing twelve months (TTM) ended in Dec. 2014 was $54.25. United Rentals Inc's 10-Year median P/S ratio is 0.74. Therefore, the Median P/S Value for today is $40.15.
As of today, United Rentals Inc's share price is $88.43. United Rentals Inc's median P/S value is $40.15. Therefore, United Rentals Inc's Price to Median P/S Value Ratio for today is 2.20.
During the past 13 years, the highest Price to Median P/S Value Ratio of United Rentals Inc was 2.86. The lowest was 0.27. And the median was 0.98.
United Rentals 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 0.74.
United Rentals Inc's revenue per share for the trailing twelve months (TTM) ended in Dec. 2014 was 11.07 (Mar. 2014 ) + 13.25 (Jun. 2014 ) + 14.84 (Sep. 2014 ) + 15.09 (Dec. 2014 ) = $54.25.
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.
United Rentals 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|
United Rentals Inc Annual Data
United Rentals Inc Quarterly Data