Question

HD Projected share price 2013 82.34 $ $ $ $ $ $ Price Revenuse (SM) Net Income ($M) # of shares out (M) Operating Cash Flows ($M) 2012 61.85 70,395 3,883 1,570 6,651 2014 104.97 78,812 5,385 1,434 ,628 2015 132.25 83,176 6,345 1,346 8,242 2016 134.08 88,519 7,009 1,283 9,373 Average 2017 189.53 94,595 7,957 4,535 1,511 6,975 1,234 7 9,783 EPS SPS CEPS P/E P/SPS P/CFPS Growth Rate EPS_G SPS_G CFPS_G 21.12% 11.32% 13.35% P/E method P/SPS methd P/CFPS method $ $ $ 211.38 163.70 173.78

Please show with all steps

Answer 1

		2012	2013	2014	2015	2016	2017	Average	Projected share price	Formula used
a)	Price ($)	61.85	82.34	104.97	132.25	134.08	189.53			Given
b)	Revenue ($M)	70395	74754	78812	83176	88519	94595			Given
c)	Net income ($M)	3883	4535	5385	6345	7009	7957			Given
d)	# of shares out (M)	1570	1511	1434	1346	1283	1234			Given
e)	Operating cashflows ($M)	6651	6975	7628	8242	9373	9783			Given
f)	EPS (f=c/d)	2.4732	3.0013	3.7552	4.7140	5.4630	6.4481			EPS= Net income/ No. of shares outstanding
g)	SPS (g=b/d)	44.8376	49.4732	54.9596	61.7949	68.9938	76.6572			SPS= Revenue/ No. of shares outstanding
h)	CFPS (h= e/d)	4.2363	4.6161	5.3194	6.1233	7.3055	7.9279			CFPS= Operating cashflows/ No. of shares outstanding
i)	P/E (i= a/f)	25.0076	27.4346	27.9530	28.0549	24.5434	29.3930	27.0644		P/E= Price per share/Earning per share
j)	P/SPS (j= a/g)	1.3794	1.6643	1.9100	2.1401	1.9434	2.4724	1.9183		P/SPS= Price per share/Sales per share
k)	P/CFPS (k= a/h)	14.6000	17.8374	19.7335	21.5977	18.3532	23.9068	19.3381		P/CFPS= Price per share/CFPS
	EPS_G							21.12%		See below
	SPS_G							11.32%		See below
	CFPS_G							13.35%		See below
	P/E method								211.37	See below
	P/SPS method								163.70	See below
	P/CFPS method								173.78	See below
	Calculation of average ratios
	P/E= (25.01+27.43+27.95+28.05+24.54+29.39)/6 = 27.0644
	P/SPS= (1.38+1.66+1.91+2.14+1.94+2.47)/6= 1.9183
	P/CFPS= (14.60+17.84+19.73+21.60+18.35+23.91)/6= 19.3381
	Calculation of growth rate
	Growth rate= ((End value/Start value)^(1/no of years))-1
	EPS= ((6.44814/2.47325)^(1/5))-1= 21.12%
	SPS= ((76.65721/44.83758)^(1/5))-1= 11.32%
	CFPS= ((7.92788/4.23631)^(1/5))-1= 13.35%
	Calculation of share price
	Expected EPS 2018= EPS of 2017+ growth
	Expected EPS= 6.44814*121.12%= $ 7.80998
	Similarly,
	Expected SPS= 76.65721*111.32%= $85.33481
	Expected CFPS= 7.92788*113.35%= $ 8.98625
	Therefore, share price by different methods can be arrived as:-
	Share price by P/E method= Expected EPS * Average P/E ratio= 7.8099*27.0644= $211.37
	Share price by P/SPS method= Expected SPS * Average P/SPS ratio= 85.3348*1.9183= $163.70
	Share price by P/CFPS method= Expected CFPS * Average P/CFPS ratio= 8.98625*19.3381= $173.78