One of the best methods to learn about investing is by studying the purchases of the most successful investors. By utilizing Gurufocus' "Guru Trades" feature, we can inspect which of the top investors own a piece of the stock we are considering buying.
If we are looking for a long-term hold, perhaps being on the side of a great value investor, like Mario Gabelli (Trades, Portfolio) might improve our odds. On the other hand, if we identify a value investor reducing his or her position in the company, we may want to further investigate.
Today we study Energizer Holdings, a 2-Star Business Predictability ranked marketer and manufacturer of batteries. 
Taking a look at the history of Mario’s Energizer holding history, we notice he held a significant number of shares in 2009 but decreased since. There have been occasional increases in his holding, like in 2011, but the total number of shares is down since 2009. Perhaps, Mario is selling because he believes the shares are approaching fair value.
One way to identify value is to compare revenue to the price being paid for that revenue. Using the Interactive Chart feature in Gurufocus we can plot market capitalization and revenue on the same chart. As the price, or market cap, increases above revenue, we identify the market is bidding a premium on every $1.00 of Energizer sales. The further this line diverges from revenue, the more the market is paying for each $1.00 of revenue.
Another way to view this valuation technique is by plotting the same figures together. Dividing price by revenue we get what investors call a price-to-sales ratio. Using Gurufocus.com interactive charts, we plot this on a chart and study its historical range. The history of the ratio is very important because in the investing world history often repeats. When times are bad the P/S ratio may decrease. During good times, the P/S ratio increases.
Looking at today’s figure of 1.9, we see that every $1.00 of revenue is being priced at $1.90. Looking at the historical range, 1999 and 2009 were times when the price of revenue was trading at a discount. Only in 2000 and 2007 showed times when ENR revenue was priced more than today's price of $1.90. Does this mean ENR is overvalued?
If revenue grows very quickly or if margins expand, then the premium on sales may be warranted. If margins do not expand and revenue slows, then maybe the price for each $1.00 of sales might revert back to a lower range. This may prove dangerous.
Thanks to Gurufocus.com for the Interactive Charts feature.
