Question

Target (TGT) recently earned a profit of $4.15 per share and has a P/E ratio of 23.19. Earnings have been growing at 11.5 percent per year over the past few years. If this growth continues, what would the stock price be in five years if the P/E ratio remains unchanged

Answer 1

$165.85

Step-by-step explanation:

Calculation for what would the stock price be in five years

First step is to calculate the EPS in 5 years

Using this formula

EPS in 5 years=EPS 0 (1+ Growth rate)^n

Let plug in the formula

EPS in 5 years=4.15*(1+11.5%)^5

EPS in 5 years=$7.1519

Now let calculate for the stock price in 5 years

Using this formula

Stock price in 5 years=P/E ratio*EPS in 5 years

Let plug in the formula

Stock price in 5 years=23.19*$7.1519

Stock price in 5 years=$165.85

Therefore what would the stock price be in five years is $165.85