Mega Computer's financial statements show 1,000 shares of common stock with a par value of $10,000, retained earnings of $20,000, additional paid in capital of $10,000, and long-term debt of $30,000. If the price of a share of stockl is 29 5/8, what would you recommend?
2006-11-15 14:13:07 · 2 answers · asked by Anonymous in Business & Finance ➔ Investing
At first, I thought that there is not enough information here to make a decent analysis. Then I realized that the market value of the stock is less than the book value of retained earnings plus paid in capital.
I would still want to know more about the company's earnings -- but with a book to market ratio greater than one, I'd say it is probably undervalued.
2006-11-16 01:08:55 · answer #1 · answered by Ranto 7 · 0⤊ 0⤋
i really don't think the criteria of what you mentioned is relevant to whether or not the stock will appreciate. earnings are key. i use the PEG ratio. you take the price divided by the projected future earnings rate. if it is 1 or less, it is undervalued, while 1 or better is overvalued. Generally speaking, if you are a growth investor, the valuation shouldn't matter nearly as much as its earnings growth. Stocks are like everything else, you get what you pay for.
2006-11-15 16:27:02 · answer #2 · answered by little ricky 1 · 0⤊ 0⤋