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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. The Western Union Co's revenue per share for the trailing twelve months (TTM) ended in Dec. 2015 was $10.574. The Western Union Co's 10-Year median P/S ratio is 2.07. Therefore, the Median P/S Value for today is $21.89.
As of today, The Western Union Co's share price is $20.00. The Western Union Co's median P/S value is $21.89. Therefore, The Western Union Co's Price to Median P/S Value Ratio for today is 0.91.
During the past 13 years, the highest Price to Median P/S Value Ratio of The Western Union Co was 1.86. The lowest was 0.71. And the median was 1.00.
The Western Union Co'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 2.07.
The Western Union Co's revenue per share for the trailing twelve months (TTM) ended in Dec. 2015 was 2.515 (Mar. 2015 ) + 2.662 (Jun. 2015 ) + 2.726 (Sep. 2015 ) + 2.671 (Dec. 2015 ) = $10.574.
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.
The Western Union Co'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|
The Western Union Co Annual Data
The Western Union Co Quarterly Data