General Electric Company (GE) is one of the world\'s leading infrastructure and
ID: 2534069 • Letter: G
Question
General Electric Company (GE) is one of the world's leading infrastructure and financial services company. On March 8, 2013 the company's trailing (twelve months) earnings per share was $1.35, and with a market price per share of $22, indicated a trailing price-earnings multiple of 16.3.
Required
1. According to Thomson Financial, the consensus forward price-earnings multiple is 12.85. What is the consensus forecasted earnings-per-share? Round answer to two decimal places.
$Answer
2. Using your rounded consensus forecast of future earnings-per-share from part one, and the current trailing price earnings multiple of 16.3, what should GE's target share price be? Round your answer to two decimal places.
$Answer
Is Thomson Financial, GE's one-year target price of $25 per share lower than or higher than your calculated target price?
Explanation / Answer
EPS $1.35 Market Price $22.00 P/E Ratio = $22/$1.35 $16.30 a) Forward price-earnings multiple 12.85 Forecasted earnings-per-share = $22/12.85 $1.71 b) Price-earnings multiple 16.3 Forecasted earnings-per-share =(part a) $1.71 GE's target share price = 16.3 x $1.71 $27.91 c) GE's one-year target price $25 is lower than the calculated target price.
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