Jonathan is evaluating the stock of Pyramid Constructors, which is currently trading at $34 per share. He gathers the following information regarding the company:

• Sales per share = $9.71
• Long-term profit margin = 11.50%
• Dividend payout ratio = 35%
• Earnings growth rate = 9%
• Required rate of return on equity = 10%

Based on the justified P/S multiple, the stock is most likely:

Select one:

a.

Undervalued.

b.

Fairly valued.

c.

Overvalued.

Question

An analyst gathered the following information regarding the stock of Pluto Inc:

• Current market price = $46
• Required rate of return on equity = 12%
• Consensus growth = 5%

Given that the stock offers a dividend yield of 5.5%, based on its justified dividend yield, the stock is most likely:

Select one:

a.

Undervalued.

b.

Fairly valued.

c.

Overvalued.