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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. The Valspar Corp's revenue per share for the trailing twelve months (TTM) ended in Jan. 2016 was $51.969. The Valspar Corp's 10-Year median P/S ratio is 1.01. Therefore, the Median P/S Value for today is $52.49.
As of today, The Valspar Corp's share price is $107.55. The Valspar Corp's median P/S value is $52.49. Therefore, The Valspar Corp's Price to Median P/S Value Ratio for today is 2.05.
During the past 13 years, the highest Price to Median P/S Value Ratio of The Valspar Corp was 1.60. The lowest was 0.51. And the median was 1.03.
The Valspar 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 1.01.
The Valspar Corp's revenue per share for the trailing twelve months (TTM) ended in Jan. 2016 was 13.024 (Apr. 2015 ) + 14.014 (Jul. 2015 ) + 13.943 (Oct. 2015 ) + 10.988 (Jan. 2016 ) = $51.969.
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.
The Valspar 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|
The Valspar Corp Annual Data
The Valspar Corp Quarterly Data