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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 Digital Corp's revenue per share for the trailing twelve months (TTM) ended in Jun. 2016 was $55.036. Western Digital Corp's 10-Year median P/S ratio is 0.92. Therefore, the Median P/S Value for today is $50.63.
As of today, Western Digital Corp's share price is $58.47. Western Digital Corp's median P/S value is $50.63. Therefore, Western Digital Corp's Price to Median P/S Value Ratio for today is 1.15.
During the past 13 years, the highest Price to Median P/S Value Ratio of Western Digital Corp was 1.61. The lowest was 0.23. And the median was 0.85.
Western Digital 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 0.92.
Western Digital Corp's revenue per share for the trailing twelve months (TTM) ended in Jun. 2016 was 14.359 (Sep. 2015 ) + 14.175 (Dec. 2015 ) + 12.06 (Mar. 2016 ) + 14.442 (Jun. 2016 ) = $55.036.
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 Digital 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|
Western Digital Corp Annual Data
Western Digital Corp Quarterly Data