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AviBank Plastics generated an EPS of $4
AviBank Plastics generated an EPS of $4.04 over the last 12 months. The company's earnings are expected to grow by 31.4% next year, and because there will be no significant change in the number of shares outstanding, EPS should grow at about the same rate. You feel the stock should trade at a P/E of around 38 times earnings. Use the P/E approach to set a value on this stock.
Using the P/E approach, the value on this stock is $0. (Round to the nearest cent.)
Expert Solution
Computation of the value of the stock:-
Expected EPS = $4.04 * (1 + 31.4%)
= $5.31
P/E ratio = Price per share / Expected EPS
38 = Price per share / $5.31
Price per share = 38 * $5.31
= $201.73 Or $202
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