Question

You are trying to value the common stock shares BeGood Company using a market multiples approach. Begone just reported annual earnings of $1.74 per share. BeGood is a privately held corporation and has three main publicly traded competitors. Below, the most recent price/earnings multiples are presented for each competitor: Competitor P/E Multiple
BeSafe 11.20
Y-Not 13.25
R-U-Sure 14.88
Based on this information, determine the share price of BeGood. Use the market multiple approach and compute to the second decimal place

Answer 1

Answer:

$22.81

Explanation:

We can easily calculate share price for BeeGood company just by multiplying the current earnings per share with an average P/E ration of competitors

P/E = Price earning ratio

EPS = Earning per share

Formula: Share price = PE x EPS

Share price = $\frac{(11.2+13.25+14.88)}{3}$ x $1.74

Share price = $22.81