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ABC Corp. has earnings of $0.54 per share. XYZ Corp. is a close competitor, with $1.01...

ABC Corp. has earnings of $0.54 per share. XYZ Corp. is a close competitor, with $1.01 earnings per share. If XYZ stock is currently trading at $29.76 and you believe that the stocks are comparable, what would be a reasonable price expectation for ABC stock?

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Expert Solution

PE ratio of XYZ Corp = 29.76/1.01 = 29.47

So,

Price of ABC corp = 29.47(0.54)

Price of ABC corp = $15.91

jeff jeffy answered 2 years ago
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