Your broker recommends that you purchase JKL common stock, currently priced on a per share basis @ $13. In 2017, the stock has earnings per share of $3.25, which are expected to grow annually at 12%. Last year, JKL common stock split 3 for 1 after merging with its principal competitor, LKJ, Inc. JKL has a payout ratio of 25%. You want to earn 18% on your money. Which of the following statements is correct?

The stock is attractive because it is undervalued

The stock is attractive because it is fairly valued

The stock is unattractive because the payout ratio is too high

The stock is unattractive because it is overvalued