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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. Alleghany Corp's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was $307.34. Alleghany Corp's 10-Year median P/S ratio is 2.34. Therefore, the Median P/S Value for today is $717.64.
As of today, Alleghany Corp's share price is $429.21. Alleghany Corp's median P/S value is $717.64. Therefore, Alleghany Corp's Price to Median P/S Value Ratio for today is 0.60.
During the past 13 years, the highest Price to Median P/S Value Ratio of Alleghany Corp was 3.07. The lowest was 0.13. And the median was 0.91.
Alleghany 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 2.34.
Alleghany Corp's revenue per share for the trailing twelve months (TTM) ended in Jun. 2014 was 70.83 (Sep. 2013 ) + 80.86 (Dec. 2013 ) + 77.12 (Mar. 2014 ) + 78.53 (Jun. 2014 ) = $307.34.
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.
Alleghany 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|
Alleghany Corp Annual Data
Alleghany Corp Quarterly Data