VALUATION OF STOCK
1. ABC Inc. has an earnings per share (EPS) of $3.50, and its stock is currently trading at $45
per share. Calculate the P/E ratio for ABC Inc. and interpret the result.
2. XYZ Corp. has an enterprise value of $120 million and EBITDA of $30 million. Calculate
the EV/EBITDA multiple for XYZ Corp. and interpret the result.
3. LMN Corporation has an enterprise value of $200 million and EBITDA of $40 million.
Calculate the EV/EBITDA multiple for LMN Corp. and interpret the result.
4. ABC Corp. has a stock price of $80 per share and earnings per share (EPS) of $6. Calculate
the P/E ratio for ABC Corp. and interpret the result.
5. ABC Corporation is a publicly traded company with the following financial information:
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): $25 million
Net Income: $15 million
Total Debt: $50 million
Total Equity: $100 million
Number of Outstanding Shares: 5 million
Calculate the following valuation ratios for ABC Corporation:
Price-to-Earnings (P/E) Ratio
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
Debt-to-Equity Ratio
Earnings per Share (EPS)
6. P/B Ratio Calculation and Interpretation for DEF Ltd.
Given:
DEF Ltd. has a book value per share of $12.00.
The stock is currently trading at $30.00 per share.
Question: Calculate the P/B ratio for DEF Ltd. and interpret the result.
7. P/S Ratio Calculation and Interpretation for GHI Inc.
Given:
GHI Inc. has total revenue of $100 million.
The market capitalization of GHI Inc. is $500 million.
Question: Calculate the P/S ratio for GHI Inc. and interpret the result.
8. DEF Ltd. is a publicly traded company that has been experiencing strong growth in its
market segment. The company recently reported its most recent financial statements,
revealing that its total assets amount to $250 million, and its total liabilities stand at $150
million. Based on these figures, the company’s book value is $100 million. DEF Ltd. has 8
million shares outstanding, and its stock is currently trading at $30.00 per share.
Required:
Calculate the Book Value per Share for DEF Ltd.
Determine the P/B ratio using the information above.
Interpret the P/B ratio in the context of the company’s market performance and investor
expectations. Is the company trading at a premium or discount compared to its book value?
Assumptions:
The market capitalization of DEF Ltd. is the current share price multiplied by the number of
shares outstanding.
The book value is calculated as total assets minus total liabilities.
9. GHI Inc. is a rapidly growing technology company that specializes in software
development. The company’s financial reports for the latest fiscal year show the following
details:
GHI Inc. had total annual revenues of $100 million.
The company’s total shares outstanding are 10 million shares.
The company’s current stock price is $50.00 per share.
GHI Inc. is looking to expand its product offerings and expects its revenues to grow
by 20% in the next year.
Despite the strong revenue growth, GHI Inc. has not yet turned a profit, and analysts have
raised concerns about the company's ability to achieve profitability in the near future.
Required:
1. Calculate the market capitalization of GHI Inc.
2. Determine the P/S ratio based on the current stock price and revenue.
3. Interpret the P/S ratio for GHI Inc. in light of the company's lack of profitability. How
does the P/S ratio compare to industry standards, and what does it suggest about
investor expectations for future revenue growth?
Assumptions:
The market capitalization is the product of the stock price and the number of shares
outstanding.
The P/S ratio is calculated by dividing market capitalization by total revenue.
