Question

Given the information below for HooYah! Corporation, compute the expected share price at the end of 2017 using price ratio analysis. Assume that the historical average growth rates will remain the same for 2017. (Do not round intermediate calculations. Round your answers to 2 decimal places. Exclude negative annual P/E and P/CFPS ratios from the average P/E and average P/CFPS ratio calculations. When computing annual growth rates, use a positive sign on the annual rate of change if the per share value increased in value and use a negative sign on the annual rate of change if the per share value deceased in value.)

Year	2011		2012		2013		2014		2015		2016
Price	$	12.00	$	48.50	$	120.00	$	197.00	$	87.00	$	17.50
EPS		−4.00		−3.29		−1.80		−0.48		0.06		0.06
CFPS		−13.00		−10.50		−2.80		−0.05		0.23		0.08
SPS		9.00		17.50		20.10		23.60		27.10		25.95

Share price using:
P/E ratio:

P/CF ratio:

P/S ratio:

Answer 1

Year		2011	2012	2013	2014	2015	2016
Price	A	12.00	48.50	120.00	197.00	87.00	17.50
EPS	B	(4.00)	(3.29)	(1.80)	(0.48)	0.06	0.06
CFPS	C	(13.00)	(10.50)	(2.80)	(0.05)	0.23	0.08
SPS	D	9.00	17.50	20.10	23.60	27.10	25.95
								Average
P/E	A / B	NA	NA	NA	NA	1,450.00	291.67	870.83
P/CF	A / C	NA	NA	NA	NA	378.26	218.75	298.51
P/S	A / D	1.33	2.77	5.97	8.35	3.21	0.67	3.72
Annual growth rate								Average
EPS							0.00%	0.00%
CFPS							-65.22%	-65.22%
SPS			94.44%	14.86%	17.41%	14.83%	-4.24%	27.46%

Hence, Share price using:

P/E ratio: Average P/E ratio x EPS of 2016 x (1 + average growth rate) = 870.83 x 0.06 x (1 + 0.00%) =  52.25

P/CF ratio: Average P/CF ratio x CFPS of 2016 x (1 + average growth rate) = 298.51 x 0.08 x (1 - 65.22%) = 8.31

P/S ratio: Average P/S ratio x EPS of 2016 x (1 + average growth rate) = 3.72 x 25.95 x (1 + 27.46%) = 122.97