The Price is Right!
Utilizing 1 of these public companies—Target, Coke, Pepsi, Wal-Mart, or J. P. Morgan—determine the right price for that company’s stock in the following 5 easy steps:
- Visit this Web site.
- Type in your selected company’s name in the Quote Search box, and select your company’s stock symbol. Jot down the current stock price.
- Select the Analysis tab, and find the Analyst Recommendation box. Jot down the stock’s Earnings Per Share (EPS) Estimate.
- Select the Price Ratios tab, and jot down the current Price to Earnings Ratio (P/E) for the industry (not the company).
- Using the PE valuation model to determine the right price for this stock, multiply the industry average P/E ratio by the stock’s EPS to estimate the intrinsic price of the stock.
Answer the following questions:
- Is this stock overvalued or undervalued when compared to the current stock price?
- What are the analysts’ recommendations for this stock (buy, sell, or hold)?
- Do you agree with them? Would you consider purchasing this stock? Why?