Davis, Inc. currently has an EPS of $2.01 and an earnings growth rate of 8%. The benchmark PE ratio is 24. What is the target share price in 6 years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Price Earnings Ratio
The price earnings ratio is a market valuation measure of a company and gives the dollars investors are willing to pay in the markets for every dollar of company's earnings. The price earnings ratio of a firm is compared with peers to determine the level of undervaluation or overvaluation.
Answer and Explanation: 1
- Earnings per Share = $2.01
- Growth Rate = 8% = 0.08
- Benchmark Price Earnings = 24
Since the growth rate is constant, we first need to find...
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fromChapter 13 / Lesson 5
In this lesson, we'll review the definition of a stock's price-earnings ratio and show how investors can use it in the analysis of the decision to buy or sell that stock.