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    Estimating the price of given stock

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    You have the following information on Proctor & Gamble (PG) and Johnson & Johnson (JNJ):

    PG: P-E (which is Price/EPS) = 22.42
    JNJ: EPS = 3.14

    a. Using PG as a comparable, estimate JNJ's price: ______________
    b. The current price of JNJ is about $69.50 per share. How does your estimate compare to the current price (high, low or about the same)? ___________________________
    c. What is one problem with using a comparable (such as PG) to estimate the price of another firm (such as JNJ)?

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    https://brainmass.com/economics/finance/estimating-price-given-stock-509195

    Solution Preview

    a. Using PG as a comparable, estimate JNJ's price.

    JNG Price=PE*EPS=22.42*3.14=70.40
    We have used PE ratio of PG as it is comparable.

    b. The current price of JNJ is about $69.50 ...

    Solution Summary

    The solution describes the steps to estimate the price of given stock by using comparable. It also discusses the problems of using this method.

    $2.19