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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. VMware Inc's revenue per share for the trailing twelve months (TTM) ended in Dec. 2015 was $15.397. VMware Inc's 10-Year median P/S ratio is 8.23. Therefore, the Median P/S Value for today is $126.72.
As of today, VMware Inc's share price is $54.61. VMware Inc's median P/S value is $126.72. Therefore, VMware Inc's Price to Median P/S Value Ratio for today is 0.44.
During the past 12 years, the highest Price to Median P/S Value Ratio of VMware Inc was 2.72. The lowest was 0.45. And the median was 1.01.
VMware 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 8.23.
VMware Inc's revenue per share for the trailing twelve months (TTM) ended in Dec. 2015 was 3.51 (Mar. 2015 ) + 3.564 (Jun. 2015 ) + 3.944 (Sep. 2015 ) + 4.379 (Dec. 2015 ) = $15.397.
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.
VMware 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|
VMware Inc Annual Data
VMware Inc Quarterly Data