Project #14464 - Stock EPS and P/E

1. What is the current stock price of Visa? (date your analysis)

2. What is their trailing (ttm) EPS?

3. What is the consensual estimate for their next fiscal year end EPS? (hint: Look under Analyst Estimates in Yahoo Finance.)

4. What is the consensual 5-year growth rate for their earnings?

5. Compute trailing PE ratio, forward PE ratio, and PEG ratio. Show your computations. Compare your numbers to the numbers in Yahoo Finance.

6. Pick a comparable company that can serve as a benchmark for your P/E analysis. (I’d suggest picking the better match from their natural rivals MasterCard INC. (MA) or American Express (AXA)) . Indicate which company you choose for benchmark. Calculate and report the trailing PE ratio, forward PE ratio, and PEG ratio for your benchmark.

7. Does Visa appear to be overvalued or undervalued relative to the benchmark stock, based on the three different measures?

8. List two to three reasons why the PE ratio analysis is problematic. Support your argument with examples based on the numbers for Visa and your benchmark company.

9. An alternative approach to compute a price for Visa will be to use the dividend discount model. What was the annual growth rate of the dividends of Visa over the last year – 2012 to 2013? Over the last five years 2008 to 2013? (hint: Look at the “Historical Prices”> “Dividends Only” page in Yahoo Finance.)

10. Can we use this growth rate to compute a “fair” price for Visa using the constant growth dividend model? If not, why not?

Subject Business
Due By (Pacific Time) 10/14/2013 12:00 am
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