Question

part a

Suppose a company has a stock price of $42, earnings of $2.12 per share during the last twelve months, forecasted earnings of $2.84 over the following year, and average earnings growth forecast of 12.5% per year for the next five years. What is this stock's Trailing P/E ratio, rounded to one decimal place?

part b

Same company as above: Stock price of $42, earnings of $2.12 per share during the last twelve months, forecasted earnings of $2.84 over the following year, and average earnings growth forecast of 12.5% per year for the next five years. What is this stock's Forward P/E ratio, rounded to one decimal place?

Answer 1

Current price of stock , P0 = $42 Previous earnings per share $2.12 $2.84 Forward earnings per share Growth rate 12.5% = Current price of stock Previous earnings per share/ Trailing P/E ratio $42 $2.12 Per share 19.81132075 Times = 19.81 Times (Rounde) Current price of stock Forward earnings per share Forward P/E ratio $42 $2.84 Per share = 14.78873239 Times 14.79 Times (Rounded)