Session 12: Equity Investments: Valuation Models
Reading 44: Market-Based Valuation: Price and Enterprise Value Multiples
LOS r: Evaluate whether a stock is overvalued, fairly valued, or undervalued based on comparisons of multiples.
At a CFA society function, Robert Chan comments to Li Chiao that Xanedu Industries’ expected dividend growth rate is 5.5%, dividend payout ratio (g) is 40%, and required return on equity (r) is 12%. Based on a justified leading P/E ratio compared to a market P/E ratio of 8.0, Xanedu Industries is most likely:
Justified Leading P/E = payout ratio / (r ? g). When the expected dividend growth is 5.5%, the justified leading P/E = 0.40 / (0.12 ? 0.055) = 6.15. This is less than the market P/E of 8.0.
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发表于 2011-3-18 15:58
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