Estimation of price using various methods:

First choose a publicly traded company that you would hypothetically want to analyze and estimate its price. Please get approval from me so that two students do not estimate the same stock.

Estimation of price using various methods:

  1. Method 1: The Dividend Discount Model estimation, You need to perform the followings:
  1. If you chose a mature stock: use the Constant Dividend Growth Model (g < k) of chapter 6, (Equation 6-3), find current dividends per share, D(0), from the income statement. Estimate the dividend growth rate, g. You can estimate g in two to three different ways, like historical method, analysts’ estimate, or g = historical ROE* retention rate; then take an average these methods for your final g. Next, estimate the discount rate, k, using the CAPM and D1/P0 +g,  and bond yield + premium; then take the average of these three for your final K. Once you have D1, g, and K estimated, then estimate the stock value. Then perform a sensitivity/scenario analysis, see the Valuation of ABC Mature stock file.
    1. If your stock is a growth stock (g>k), then you need to use two or three stage discounted cash flow model. The estimation of growth stocks are a bit more complicated than mature stocks, an example of two-stage growth is provided in your textbook (An my lecture notes of ch 6). An example of 3 stage growth model is provided in this folder,  see the valuation of Growth stock XYZ Excel file.

Note: If your stock is a mature stock, then you do part a above; if your stock is a growth stock you must do part b above. Thus, based on your chosen stock, you either do a or b, you should not do both.

  • Method 2, Residual Income Model: Find or estimate the EPS growth rate. Find book value per share on the balance sheet. Use the discount rate k from part a or b above and estimate the value of your stock according to residual income model of chapter 6. RIM can provide weird estimation. Don’t worry if you get crazy estimate.
  • Method 3:  Price Ratio Analysis (Problem 21 of Ch 6)
    • P/E ratio: Find or estimate the EPS growth rate or g. (You can use the same EPS growth rate from part a or b.) Predict next year’s EPS. Then stock price using relative valuation method = Historical P/E * ESP1 (Use the average or historical P/E ratio).
http://bigcharts.marketwatch.com

And under interactive charts and advanced chart (Lower indicator) you can plot The P/E ratio. If you chose 10 year chart, you can get approximate average P/E from the lower chart.

 I would get the average or historical ratios from Morningstar.com

  • P/CF ratio: Find or estimate the CFPS growth rate. Predict next year’s CFPS. (You can use Cash from Operations on the Cash Flow Statement to approximate operating cash flow.) Then predict stock price using the average P/CF ratio. You could get historical ratios from Morningstar.com. Could also use bigcharts.com
  • P/S ratio: Find or estimate the SPS growth rate. Predict next year’s SPS. Then predict stock price using the average P/S ratio.
  • Now for the fun part! You now have as many as five different estimates for the stock you have  chosen. Compare your estimates of stock value to the current actual stock price. Make a prediction about whether the stock is underpriced or overpriced (i.e. whether you should buy it or short it).
  • What you are to turn at the end of semester: Create a neat, organized report of your stock analysis:
  1. Section 1: Include your name, the assignment (Term Paper), and a typed concise description of your analysis. Include why you picked the stock, and your conclusions on whether the stock is overvalued or undervalued. Do the results of your calculations agree with other current information that you may know about the company?
  • Section 2: Neat, organized, legible estimations of each model discussed above. Clearly show your five (a or b, c, d, e, and f) stock price valuations and compare it to its market price.
  • Section 3: Conclusion based on your analysis
  • References

Note: You can finish writing this paper after we go over chapter 6.

Research Paper 101
Calculate your paper price
Pages (550 words)
Approximate price: -

Reasons to trust Research Paper 101

On Time Delivery

We pride ourselves in meeting the deadlines of our customers. We take your order, assign a writer but allow some more time for ourselves to edit the paper before delivering to you. You are guaranteed a flawless paper on a timely manner...

24x7 Customer Live Support

Our team at Research Paper 101 is committed to handling your paper according to the specfications and are available 24*7 for communication. Whenever you need a quick help, you can talk to our writers via the system messaging or contact support via live chat and we will deliver your message instantly.

Experienced Subject Experts

Online Experts from Research Paper 101 are qualified both academically and in their experiences. Many are Masters and Phd holders and therefore, are qualified to handle complex assignments that require critical thinking and analyses...

Customer Satisfaction

We offer dissertation papers as per students’ wishes. We also help craft out the best topics and design concept papers. By ordering with us, you are guaranteed of defending and making through those hard faced professors in the defense panel!

100% Plagiarism Free

We at Research Paper 101 take plagiarism as a serious offence. From the start, we train our writers to write all their papers from scratch. We also check if the papers have been cited appropriately. Our website also has a tool designed to check for plagiarism that has been made erroniusly. In essense, the paper you get will be 100% legit...

Affordable Prices

We understand that being a student is very challenging, some students balance between work and studies in order to survive. We therefore offer pocket friendly rates that are very competitive in the market.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Reviews

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Reviews

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.

error: