Question

Given the information below for Seger 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.)

Year	2011		2012		2013		2014		2015		2016
Price	$	84.90	$	90.80	$	89.50	$	87.00	$	108.50	$	123.90
EPS		2.70		3.41		4.21		4.91		7.65		8.65
CFPS		7.92		8.76		9.10		10.77		12.19		13.36
SPS		66.50		71.50		70.90		74.40		85.60		93.60

Answer the Following:

Using P/E Ratio: ____________ (Share Price $)

Using P/CF Ratio: ____________ (Share Price $)

Using P/S Ratio: _____________ (Share Price $)

Answer 1

Year	2011	2012	2013	2014	2015	2016	Average	2017 parameters' estimates	2017 price estimate
								=2016 value*(1+average growth rate)
Price	84.9	90.8	89.5	87	108.5	123.9
EPS	2.7	3.41	4.21	4.91	7.65	8.65		10.99	229.98	=10.99*20.93
CFPS	7.92	8.76	9.1	10.77	12.19	13.36		14.85	141.47	=14.85*9.53
SPS	66.5	71.5	70.9	74.4	85.6	93.6		100.34	126.59	=100.34*1.26
P/E ratio= Price/ EPS for the year	31.44	26.63	21.26	17.72	14.18	14.32	20.93
P/CF ratio= Price/ CFPS for the year	10.72	10.37	9.84	8.08	8.90	9.27	9.53
P/S ratio= Price/SPS for the year	1.28	1.27	1.26	1.17	1.27	1.32	1.26
EPS growth rate		26.30%	23.46%	16.63%	55.80%	13.07%	27.05%
CFPS growth rate		10.61%	3.88%	18.35%	13.18%	9.60%	11.12%
SPS growth rate		7.52%	-0.84%	4.94%	15.05%	9.35%	7.20%

Price =average P/x multiple * estimated 2017 for parameter x
The price estimate from PE ratio is much higher than any other price multiple as the growth in earnings is much higher than the growth in cash flows or sales