Question

Problem 6-21 Price Ratio Analysis (LO4, CFA4) Given the information below for Seger Corporation, compute the expected share price at the end of 2017 using price ratio analysis. Assume that the historical average growth rates will remain the same for 2017. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Price EPS 2011 $103.50 4.59 8.02 60.10 2012 $109.40 5.30 8.84 65.10 2013 $108.10 6.10 9.16 64.50 2014 $105.60 6.80 10.87 68.00 2015 $127.10 7.75 12.25 79.20 2016 $142.50 8.75 13.40 87.20 CEPS SPS Share price Using P/E ratio Using P/CF ratio Using PIS ratio

Answer 1

Answer:

Calculations:

Step 1:Find:P/E, P/CFPS, P/SPS.

Step 2:Find Average of Price, EPS, CFPS, SPS, P/E, P/CFPS, P/SPS.

Step 3:Find Share Price using P/E Ratio, P/CF Ratio, P/S Ratio.

Year	2011	2012	2013	2014	2015	2016	Total	Average(Total/6)
Price($)	103.5	109.4	108.1	105.6	127.1	142.5	696.2	116.0333333
EPS	4.59	5.3	6.1	6.8	7.75	8.75	39.29	6.548333333
CFPS	8.02	8.84	9.16	10.87	12.25	13.4	62.54	10.42333333
SPS	60.1	65.1	64.5	68	79.2	87.2	424.1	70.68333333
P/E:(Price/EPS)	22.549	20.6415	17.72	15.53	16.4	16.29	17.71952	18.18782776
P/CFPS:(Price/CFPS)	12.905	12.3756	11.8	9.715	10.38	10.63	11.13208	11.30112709
P/SPS:(Price/SPS)	1.7221	1.68049	1.676	1.553	1.605	1.634	1.641594	1.645083966

Final Answer:

Expected Share Price using Price Ratio			Share Price($)
Using P/E Ratio:	=Avergae P/E X Avergae EPS	=18.1878277612726 X 6.54833333333333	119.1
Using P/CF Ratio:	=Avergae P/CFPS X Avergae CFPS	=11.3011270886821 X 10.4233333333333	117.8
Using P/S Ratio:	=Avergae P/SPS X Avergae SPS	=1.64508396593273 X 70.6833333333333	116.28