A stock has a P/E Ratio of 24. The company paid a dividend of $2.18, ROE is 17%, SGR is 8%. Price of stock?

Question

P/E Ratio is price of the stock divided by earnings per share. ROE is return on equity, or net income divided by shareholders equity. SGR is the sustainable growth rate, ROE x Retention ratio. I can't figure out how to find the stock price, PLEASE HELP!

Answer 1

g (or SGR) = ROE * retention ratio

Substituting known values: 0.08 = 0.18 * retention ratio

Solving for retention ratio we get 0.444.

Dividend = Earnings per share * (1 - retention ratio)

Substituting known values: 2.18 = EPS * (1 - 0.444)

Solving for EPS we get $3.92.

P/E ratio = stock price/EPS.

Substituting known values: 24 = stock price/$3.92.

Solving for stock price we get $94.08.

Answer 2

There's no way to tell with the information you've provided. If you knew the last quarters' earnings (E), you could get an approximate price from the PE ratio.

Other wise plug in the stock symbol into yahoo and look at a price chart.
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