Question

Frank Martin Inc. has earned $3.14 per share in the past year and is forecasted to...

Frank Martin Inc. has earned $3.14 per share in the past year and is forecasted to earn $4.86 per share next year. Comparable companies are trading at a trailing P/E ratio of 17.1. What is the implied price of Frank Martin Inc.'s shares using relative valuation? Round to one decimal place.

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Answer #1

Trailing PE = current share price / last year earnings per share

current share price = Trailing PE * last year earnings per share

Frank Martin Inc. has earned $3.14 per share in the past year. The last year earnings per share = $3.14 (trailing earnings per share)

The trailing PE ratio of comparable companies is 17.10.

current share price = Trailing PE * last year earnings per share

Implied price of Frank Martin Inc.'s shares using relative valuation = 17.10 * $3.14

Implied price of Frank Martin Inc.'s shares using relative valuation = $53.7

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