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collect the industry average price multiples and the company's financial to compute the stock value based on the price multiples.Stock Value = Industry P/E * Company EPS

Stock Value = Industry Market-to-book * Company Book Value per Share

Stock Value = Industry Price-to-Sales * Company Sales per Share

Based on your findings, comment on the current price being too high, too low, or just right.

Industry price ratios are available on MSN Money, under Analysis/Price Ratios.

Example from Professor

Valuation Example on Walmart

I like to use the price ratios to evaluate Walmart. First, I collect the company's financial information from MSN Money.

For 2021 (under Financials)

Sales or Revenues: $559,151 million

Net Income: $13,510 million

(Book) Equity: $80,925 million

Number of shares outstanding: 2,821 million (under Balance Sheet)

Then, I need to get industry average price ratios (under Analysis/Price Ratios).

Industry P/E: 33.14

Industry Price/Sales: 0.45

Industry Price/Book: 2.85

can compute the expected stock price.

Expected Price based on P/E = Industry P/E * EPS = 33.14 * 13,510 / 2,821 = 158.71

Expected Price based on Price/Sales = Industry Price/Sales * Sales per share = 0.45 * 559,151 / 2,821 = 89.19

Expected Price based on Price/Book = Industry Price/Book * Book Equity per share 2.85 * 80,925 / 2,821 = 81.76

The current stock price is $142.15 (as on 8/2/21), which is above expected prices based on the price/ sales and price / book ratios. Based on the computation, I conclude that the stock is currently over-priced.

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