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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. Varian Medical Systems Inc's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was $28.21. Varian Medical Systems Inc's 10-Year median P/S ratio is 3.16. Therefore, the Median P/S Value for today is $89.14.
As of today, Varian Medical Systems Inc's share price is $82.50. Varian Medical Systems Inc's median P/S value is $89.14. Therefore, Varian Medical Systems Inc's Price to Median P/S Value Ratio for today is 0.93.
During the past 13 years, the highest Price to Median P/S Value Ratio of Varian Medical Systems Inc was 3.32. The lowest was 0.56. And the median was 1.01.
Varian Medical Systems 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 3.16.
Varian Medical Systems Inc's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was 7.08 (Sep. 2013 ) + 6.62 (Dec. 2013 ) + 7.38 (Mar. 2014 ) + 7.13 (Jun. 2014 ) = $28.21.
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.
Varian Medical Systems 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|
Varian Medical Systems Inc Annual Data
Varian Medical Systems Inc Quarterly Data