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Estimate the value of common stock using the P-E ratio

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Question - Calve Bank is trying to value Beer Co. using comparable valuation techniques:

a. Beer's estimated earnings per share for the coming year (also called target EPS) is $3.25 and the median forward P/E of comparable firms is 15.00. Estimate the value of common stock using the P/E ratio.

b. Beer's estimated EBITDA for the coming year is $11M and the median forward enterprise value to EBITDA ratio of comparable firms is 7.15. The market value of Beer's debt is $30M and it has no outstanding preferred stock and 1M shares of common stock. Estimate the value of common stock using the enterprise value to EBITDA ratio.

c. Beer's trailing twelve-month (TTM) earnings per share are $2.75 and the trailing P/E of comparable firms is 19.00. Estimate the value of common stock using the P/E ratio.

Reference no: EM132793111

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