Given the information below for Seger Corporation, compute the expected share pr
ID: 2729601 • Letter: G
Question
Given the information below for Seger Corporation, compute the expected share price at the end of 2014 using price ratio analysis. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
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Given the information below for Seger Corporation, compute the expected share price at the end of 2014 using price ratio analysis. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
Expected share price using P/E = 18.64(3.75)(1.0814) = $75.57
Expected share price using P/CFPS= 8.20(7.56)(1.0666) = $66.08
Expected share price using SPS = .891($74.05)(1.0694) = $70.55
A reasonable price range would seem to be $66 to $76 per share.
Year
2008
2009
2010
2011
2012
2013
Total
Price
$78.90
$84.80
$83.50
$81.00
$102.50
$117.90
EPS
$4.39
$5.10
$5.90
$6.60
$7.15
$8.15
Growth in EPS
$0.71
$0.80
$0.70
$0.55
$1.00
Growth rate
16.17%
15.69%
11.86%
8.33%
13.99%
66.04%
P/E Ratio
17.97
16.63
14.15
12.27
14.34
14.47
89.83
1.
Average P/E ratio = 89.83/6 = 14.97
Average growth rate = 66.04%/5 = 13.21%
EPS for 2014 = EPS for 2013 * (1 + Growth rate) = $8.15*(1+0.1321) = $9.23
Expected share price using P/E Ratio = EPS for 2014 * Average P/E Ratio = $9.23*14.97 = $138.17
2.
Year
2008
2009
2010
2011
2012
2013
Total
Price
$78.90
$84.80
$83.50
$81.00
$102.50
$117.90
CFPS
$7.42
$8.36
$8.80
$10.27
$11.89
$13.16
Growth in CFPS
$0.94
$0.44
$1.47
$1.62
$1.27
Growth rate
12.67%
5.26%
16.70%
15.77%
10.68%
61.09%
P/CFPS Ratio
10.63
10.14
9.49
7.89
8.62
8.96
55.73
Average P/CFPS ratio = 55.73/6 = 9.29
Average growth rate = 61.09%/5 = 12.22%
CFPS for 2014 = CFPS for 2013 * (1 + Growth rate) = $13.16*(1+0.1222) = $14.77
Expected share price using P/CFPS Ratio = CFPS for 2014 * Average P/CFPS Ratio = $14.77*9.29 = $137.21
3.
Year
2008
2009
2010
2011
2012
2013
Total
Price
$78.90
$84.80
$83.50
$81.00
$102.50
$117.90
SPS
$61.50
$66.50
$65.90
$69.40
$80.60
$88.60
Growth in SPS
$5.00
-$0.60
$3.50
$11.20
$8.00
Growth rate
8.13%
-0.90%
5.31%
16.14%
9.93%
38.60%
P/SPS Ratio
1.28
1.28
1.27
1.17
1.27
1.33
7.59
Average P/SPS ratio = 7.59/6 = 1.27
Average growth rate = 38.60%/5 = 7.72%
SPS for 2014 = SPS for 2013 * (1 + Growth rate) = $88.60*(1+0.0722) = $95
Expected share price using P/SPS Ratio = SPS for 2014 * Average P/SPS Ratio = $95*1.27 = $120.65
Year
2008
2009
2010
2011
2012
2013
Total
Price
$78.90
$84.80
$83.50
$81.00
$102.50
$117.90
EPS
$4.39
$5.10
$5.90
$6.60
$7.15
$8.15
Growth in EPS
$0.71
$0.80
$0.70
$0.55
$1.00
Growth rate
16.17%
15.69%
11.86%
8.33%
13.99%
66.04%
P/E Ratio
17.97
16.63
14.15
12.27
14.34
14.47
89.83
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