Stock Valuation

#1
I am new to investing. I am trying to anylyse this -->


At the current market price of Rs107, the stock is quoting at a PE of 18x FY2005E EPS of Rs6.1 and 11x FY2006E EPS of Rs9.9. We understand that the company valuations are fairly moderate as against its expected CAGR earnings growth of 41% over FY2006. Further, RoCE is expected to improve from 8.7% in FY2004 to 13.9% in FY2006. We recommend Buy with a 12-month target price of Rs135, which implies a PE multiple of 14x FY2006E earnings.

Can Somebody explain me how 12 month target price was calculated in the above case. If possible please provide the detailed explanation.

Thanks,
bomma
 

sh50

Active Member
#2
Just as you need to know your partner to get married, one needs to know the name of the stock you are referring to, my dear friend. This is almost like trendline without a trend in technical lingo.
 
#3
I want to lot of stocks in mind.

In this case I want to know how the target price of Rs 135 was calculated. I am sure it was calculated based on the numbers given in my question.

How does the name of the company matter?

bomma
 
#4
bodba said:
I want to lot of stocks in mind.

In this case I want to know how the target price of Rs 135 was calculated. I am sure it was calculated based on the numbers given in my question.

How does the name of the company matter?

bomma
I am sure other novices like me would be interested in this query. Please somebody explain.
 
#6
Equity researchers could calculate a "fair value" based on a discounted cash flow (DCF) analysis, sum of parts valuation, relative valuation etc... DCF is the most common, whereby they analyse trends in the sales growth, earnings growth, cash flow of companies over the next few years, estimate a terminal value, and then discount it to the present time (using the required rate of return on the stock) to estimate a "fair value".
The numbers that you have written about have nothing to do with fair value, which in this case is presented as a 12 month price target.
 

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