Given the information below for Seger Corporation, compute the expected share pr

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.)

Year   2008   2009   2010   2011   2012   2013
Price   $   97.60   $   103.50   $   102.20   $   99.70   $   121.20   $   136.60
EPS      2.80      3.51      4.31      5.01      7.95      8.95
CFPS      8.22      9.00      9.28      11.07      12.37      13.48
SPS      52.60      57.60      57.00      60.50      71.70      79.70

      
Using P/E ratio   $   
Using P/CFPS ratio   $   
Using P/S ratio   $   

Explanation / Answer

Average Price =  ( 97.60   +   103.50   + 102.20   + 99.70   +   121.20   +   136.60)/6

Average Price = $ 110.13

Average EPS =  (2.80 + 3.51 + 4.31 + 5.01 + 7.95 + 8.95 )/6

Average EPS = $ 5.42

Average CFPS =  (8.22 + 9.00 + 9.28   + 11.07 + 12.37 + 13.48  )/6

Average CFPS = $ 10.57

Average SPS =  ( 52.60   +   57.60 + 57.00   + 60.50  +    71.70 + 79.70  )/6

Average SPS = $ 63.18

P/E Ratio = 110.13/5.42 = 20.32

P/CFPS ratio = 110.13/10.57 = 10.42

P/S ratio = 110.13/63.18 = 1.74

Growth rate in EPS = (8.95/2.80)^(1/6) - 1 = 21.37%

Growth rate in CFPS = (13.48/8.22)^(1/6) - 1 = 8.59%

Growth rate in SPS = (79.7/52.6)^(1/6) - 1 = 7.17%

Expected EPS in 2014 = 8.95*(1+21.37%) = $ 10.86

Expected CFPS in 2014 = 13.48*(1+8.59%) = 14.64

Expected SPS in 2014 = 79.7*(1+7.17%) = 85.41

Using P/E ratio  

  Expected share price = 10.86*20.32

  Expected share price = $ 220.68

Using P/CFPS ratio   

Expected share price = 14.64*10.42

  Expected share price = 152.55

Using P/S ratio   

Expected share price = 85.41*1.74

  Expected share price = 148.61

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