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Sankey Co. has earnings per share of $3.60. The benchmark PE is 18.1 times. What stock...

Sankey Co. has earnings per share of $3.60. The benchmark PE is 18.1 times. What stock price would you consider appropriate?

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Expert Solution

The PE also Know as Price Earnings Ratio seeks to measure the ratio of Companies Market Price per share to the Earning per Share. Such a measure provides aid in determining whether the company is overvalued, undervalued or correctly valued depending upon Industry P/E.

P/E Ratio = Market Price per Share/ Earning per Share

In the given case, Earning per Share is $ 3.60 and Benchmark PE is 18.1 times.

Therefore stock price that can be considered Appropriate = Earning per Share * PE ratio

= 3.60*18.1

= $ 65.16

jeff jeffy answered 2 years ago
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