Question

Company Ticker Price per Share Earnings per Share Book Value per Share Abbott Labs ABT 54.35 3.69 13.79 Bristol-Myers-Squibb BMY 25.45 1.93 7.33 GlaxoSmithKline GSK 41.3 3.15 6.03 Johnson & Johnson JNJ 62.6 4.58 18.27 Merck MRK 36.25 3.81 10.86 Pfizer PFE $18.30 $1.20 8.19 Assuming that Novartis AG (NVS) has an EPS of $3.35, based upon the average P/E ratio for its competitors, Novartis' stock price is closest to: $44.35 $13.00 $31.86 $43.47

Answer 1

Novartis' Stock Price

Company	Price per share	Earnings per share	P/E Ratio
	(a)	(b)	(c)= (a) / (b)
Abbott Labs	54.35	3.69	14.73
Bristol-Myers-Squib	25.45	1.93	13.19
GlaxoSmithKlin	41.30	3.15	13.11
Johnson & Johnson	62.60	4.58	13.67
Merck	36.25	3.81	9.51
Pfizer	18.30	1.20	15.25
TOTAL			79.46

Average PE Ratio = 13.24 Times [79.46 / 6]

Therefore, Novartis' stock price the based on the average P/E Ratio = Earnings per share x Average P/E Ratio

= $3.35 per share x 13.24 Times

= $44.35 per share

“Hence, the Novartis' stock price is closest to $44.35”