In: Finance
XYZ is a privately held firm whose forecasted earnings per share (EPS) are $5.42, and suppose the average price/earnings (P/E) ratio for a set of similar publicly traded companies is 14.7. Estimate the intrinsic value of XYZ stock.
(Round your answer to the nearest 2 decimal points. For example, if your answer is $12.345, then enter 12.35 in the answer box.)
Given,
EPS of XYZ Ltd = 5.42$
Price/earnings ratio = 14.7
Calculation of intrinsic value of stock:
P/E ratio = MPS/EPS
14.7 = MPS/5.42
MPS = 14.7*5.42
= 79.674$ or 79.67$
Intrinsic value of stock = 79.67$
Note :
MPS = market price per share
EPS = Earnings per share