Ctia Pinho is a supervisor in the equity research division of Suite Securities. Pinho asks Flvia Silveira, a junior analyst, to complete an analysis of Adesivo S.A., Enviado S.A., and Gesticular S.A. Pinho directs Silveira to use a valuation metric that would allow for a meaningful ranking of relative value of the three companies shares. Exhibit 1 provides selected financial information for the three companies. Exhibit 1 Selected Financial Information for Adesivo, Enviado, and Gesticular (Brazilian Real, R$) Adesivo Enviado Gesticular Stocks current price 14.72 72.20 132.16 Diluted EPS (last four quarters) 0.81 2.92 0.05 Diluted EPS (next four quarters) 0.91 3.10 2.85 Dividend rate (annualized most recent dividend) 0.44 1.24 0.00 Silveira reviews underlying trailing EPS for Adesivo. Adesivo has basic trailing EPS of R$0.84. Silveira finds the following note in Adesivos financial statements: On a per share basis, Adesivo incurred in the last four quarters i. from a lawsuit, a non- recurring gain of R$0.04; and ii. from factory integration, a non- recurring cost of R$0.03 and a recurring cost of R$0.01 in increased depreciation. Silveira notes that Adesivo is forecasted to pay semiannual dividends of R$0.24 next year. Silveira estimates five- year earnings growth rates for the three companies, which are presented in Exhibit 2.