Valuation of Stock using PE ratios

Valuation of Stock using PE ratios

For this activity, you will need to select a publicly traded firm and a major competitor.
Firms from any industry can be used.
Go to reuters.com and for the firm you have selected obtain the trailing twelve-month P/E
ratio for the firm, industry, and sector. (You can use other sources if you wish)
Use information about your company’s earnings and industry and sector’s P/E s based on
the P/E ratio value your selected firm as indicated in the example. If there is no earnings
estimate, or the earnings estimate is negative, use earnings for a previous year. If that’s
also negative, pick another company for this assignment. There is an example of a
partially completed table found here. Note: the example is only complete for one of the
two firms indicated. Your submission must include the data for both firms. Boeing’s data is
included; therefore, Boeing cannot be used by any student. Lockheed-Martin is indicated as
a competitor but no information is provided. Lockheed-Martin could still be used.
Once you have completed the above write a short report discussing the valuation of your
selected firm and competitor. Note if the current price is very close to “Estimated share
price based on TTM P/E and Earnings past 12 months.” This should be very close if not you
have likely done something wrong. How does the valuation of your firm compare to that of
the competitors based on the P/E ratio? Why might this be the case? How does you firm’s
current price compare to the estimated price using the industry and sector P/E’s compare
both for the TTM and estimated year end? Is it higher or lower? Why might that be
(provide one rational reason why)? Based on simple analysis which of the two firms (your
selected firm and its competitor) appears to be undervalued? Why did you draw that
conclusion? What do you suspect is the reason?
Your submission will only need to be a single page to page and a half formatted with singles paced,
Times New Roman, 12 point font. Include a citation for where you retrieved the
data and the date retrieved. A table following the example must be included in your
submission but is not considered as part of the page to page and a half write-up. Get to the
point in your write-up. There is no need for extra “baggage.”
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