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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 Mar. 2015 was $14.28. VMWare Inc's 10-Year median P/S ratio is 8.78. Therefore, the Median P/S Value for today is $125.38.
As of today, VMWare Inc's share price is $87.72. VMWare Inc's median P/S value is $125.38. Therefore, VMWare Inc's Price to Median P/S Value Ratio for today is 0.70.
During the past 11 years, the highest Price to Median P/S Value Ratio of VMWare Inc was 3.01. The lowest was 0.56. 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 8.78.
VMWare Inc's revenue per share for the trailing twelve months (TTM) ended in Mar. 2015 was 3.36 (Jun. 2014 ) + 3.49 (Sep. 2014 ) + 3.92 (Dec. 2014 ) + 3.51 (Mar. 2015 ) = $14.28.
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