Question
You want to value the stock of a company that is not publicly traded. This company has earnings of $4.25 per share, and cash flows
You want to value the stock of a company that is not publicly traded. This company has earnings of $4.25 per share, and cash flows (CFs) of $1.85 per share. You have the following information on firms that are extremely similar to the firm that youre trying to value:
Company | Stock price per share | Earnings per share | Cash flow per share |
A | 14.85 | 2.48 | 1.36 |
B | 65.41 | 8.14 | 6.62 |
C | 36.09 | 3.86 | 4.28 |
a. What is the estimated stock price per share based upon the average price to earnings ratio (P/E ratio) for its peers?
b. What is the estimated stock price per share based upon the average price to cash flow ratio (P/CF ratio) for its peers?
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