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Using the price/earnings multiple approach, calculate the stock price of a pubic company, preferably one in the aviation business and provide the following information: Research
Using the price/earnings multiple approach, calculate the stock price of a pubic company, preferably one in the aviation business and provide the following information:
- Research the EPS for the past five years, including quarterly results from the current year.
- Estimate the future EPS.Use this information along with research that you conduct from at least 2 articles about the company's recent financial performance (within the past year).This information can be from the Wall Street Journal, New York Times, company press releases or other verifiable source.
- Determine the industry P/E for the industry using either Moody's, S&P, Finance.Yahoo or by calculating the P/E for three competitor firms and using an average of the three values.
- Calculate the expected price of the stock and compare this price to the most recent market price.
- Explain any significant differences.
JetBlue Airways Corporation stock has an EPS that has ranged from a low of ($0.37) to a high of $0.36 per share in the past five years from 2006 to 2010. Based on this historical data and expected economic and industry conditions, let's assume that the expected EPS will be $0.20 per share going forward. The price earnings ratio of the industry can be obtained from various sources, such as Moody's, Standard & Poors (S&P) or Finance.Yahoo.com. A recent P/E for the industry was around 22. Based on these assumptions, JetBlue stock would trade at $0.20 x 22 or $4.40. A recent stock price as of the time of this analysis was $5, so this was a reasonable approximation.
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