Question

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

2011

2012

2013

2014

2015

2016

Price

$

106.50

$

112.40

$

111.10

$

108.60

$

130.10

$

145.50

EPS

3.40

4.11

4.91

5.61

8.00

9.00

CFPS

8.27

9.04

9.31

11.12

12.40

13.50

SPS

62.60

67.60

67.00

70.50

81.70

89.70

	Share price
Using P/E ratio
Using P/CF ratio
Using P/S ratio

Answer 1

P/E ratio values are: 31.32, , 27.35, 22.63, 19.36, 16.26, 16.17 ; average = 22.18

EPS growth rates: 20.88%, 19.47%, 14.26%, 42.6%, 12.5% ; average = 21.94%

Expected share price using P/E = 22.18($9)(1.2194) = $243.42

P/CFPS values are: 12.88, 12.43,11.93, 9.77, 10.49, 10.78 ; average = 11.38

CFPS growth rates = 9.31%,2.99%,19.44%,11.51%,8.87% ; average = 10.42%

Expected share price using P/CFPS = 11.38($13.5)(1.1042) = $169.64

P/S values are: 1.7,1.66,1.66,1.54,1.59,1.62 ; average = 1.63

SPS growth rates: 7.99%,-.89%,5.22%,15.89%,9.79% ; average = 7.6%

Expected share price = 1.63 ($89.7)(1.076) = $157.32