Question

You notice that​ Coca-Cola has a stock price of $41.86 and EPS of $1.88. Its competitor PepsiCo has EPS of $3.65. ​But, Jones​ Soda, a small batch​ Seattle-based soda producer has a​ P/E ratio of 34.2. Based on this​ information, what is one estimate of the value of a share of PepsiCo​ stock?

Answer 1

Value of share of Pepsi Co. stock = $82

Step-by-step explanation:

Stock price of Coca-cola = $41.86

EPS = $1.88

P/E ratio = MPS / EPS

P/E ratio = $41.86 / 1.88

P/E ratio = 22.27

Jones soda P/E ratio = 34.2

Pepsi Co stock EPS = $3.65

Value of share of Pepsi Co. stock = EPS * P/E ratio

Value of share of Pepsi Co. stock = $3.65 * 22.27

Value of share of Pepsi Co. stock = $81.2855

Value of share of Pepsi Co. stock = $82