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How much should facebook share price should be

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Reference no: EM133126928

Question - Ratios can be used to calculate the company's stock values in a quick and easier way. The method compares companies within the same industry and provides (if applicable) a good sense of the level of the stock price.

Google and Facebook are two companies from the same industry(Technology); therefore, Ratio Valuation can be utilized as a form of comparing share (stock) prices and determining if prices might be over or undervalued.

The industry considers total revenueto be the most important metric as it represents the money coming from marketing and sales.

Given the following information (actual) about the two companies' stocks, answer the questions:

Google

Stock market price: $1,218.67

Outstanding shares: 695,922,604

Revenue: $39,120.00 (Millions - I know! They make tons of money!)

Facebook

Revenue: $16,900.00 (Millions)

Outstanding shares: 2,855,388,051

Market share price: $179.10

1. Based on Revenue Ratio Valuation, how much should Facebook share price should be?

2. Is it over or undervalued according to this valuation?

3. What condition, other than the fact that both companies must be from the same industry, is detrimental to the use of Ratio Valuation?

Reference no: EM133126928

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