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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. Zimmer Holdings Inc's revenue per share for the trailing twelve months (TTM) ended in Sep. 2014 was $27.27. Zimmer Holdings Inc's 10-Year median P/S ratio is 3.57. Therefore, the Median P/S Value for today is $97.22.
As of today, Zimmer Holdings Inc's share price is $111.63. Zimmer Holdings Inc's median P/S value is $97.22. Therefore, Zimmer Holdings Inc's Price to Median P/S Value Ratio for today is 1.14.
During the past 13 years, the highest Price to Median P/S Value Ratio of Zimmer Holdings Inc was 2.63. The lowest was 0.57. And the median was 1.13.
Zimmer Holdings 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 3.57.
Zimmer Holdings Inc's revenue per share for the trailing twelve months (TTM) ended in Sep. 2014 was 7.15 (Dec. 2013 ) + 6.76 (Mar. 2014 ) + 6.92 (Jun. 2014 ) + 6.44 (Sep. 2014 ) = $27.27.
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.
Zimmer Holdings 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|
Zimmer Holdings Inc Annual Data
Zimmer Holdings Inc Quarterly Data