Question

You notice that​ Coca-Cola has a stock price of $41.37 and EPS of $1.99. Its competitor...

You notice that​ Coca-Cola has a stock price of $41.37 and EPS of $1.99. Its competitor PepsiCo has EPS of $3.75. ​But, Jones​ Soda, a small batch​ Seattle-based soda producer has a​ P/E ratio of 33.5. Based on this​ information, what is one estimate of the value of a share of PepsiCo​ stock?

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Answer #1

I will be trying to derive the value of the Pepsico in comparison to that of the price to earning of Coca-Cola rather than comparing it in relation to oo Jones soda because own soda is a very small company where is coca cola is representative of a very large company and Pepsico is also reflecting the same and hence I am going to value the Pepsico in respect to the relative price to earning ratio of The Coca-Cola

Hence the value of the share of the Pepsico stock is = (price to earning ratio of Coca-Cola X Earning per share)

= (41.37/1.99*3.75)

= $77.958

Earning per share of the Pepsico stock will be $77.958

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