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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. Western Alliance Bancorp's revenue per share for the trailing twelve months (TTM) ended in Sep. 2014 was $4.43. Western Alliance Bancorp's 10-Year median P/S ratio is 3.44. Therefore, the Median P/S Value for today is $15.22.
As of today, Western Alliance Bancorp's share price is $29.01. Western Alliance Bancorp's median P/S value is $15.22. Therefore, Western Alliance Bancorp's Price to Median P/S Value Ratio for today is 1.90.
During the past 14 years, the highest Price to Median P/S Value Ratio of Western Alliance Bancorp was 11.36. The lowest was 0.31. And the median was 0.97.
Western Alliance Bancorp'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 3.44.
Western Alliance Bancorp's revenue per share for the trailing twelve months (TTM) ended in Sep. 2014 was 1 (Dec. 2013 ) + 1.1 (Mar. 2014 ) + 1.14 (Jun. 2014 ) + 1.19 (Sep. 2014 ) = $4.43.
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.
Western Alliance Bancorp'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|
Western Alliance Bancorp Annual Data
Western Alliance Bancorp Quarterly Data