Question

hi guys, can i please have some help with working out P/E ratios? xx

Answer 1

P (Price per Share) / E (Earnings per Share)

Answer 2

thanks :). is it possible to work out an intrinsic value from the p/e ratio? x

Answer 3

intrinsic value is calculated by discounting firm future cashflows at weighted average cost of capital.

Answer 4

yeah, i kinda understand...i've done some of that all ready with discounted cash flow valuation. But now i'm trying to find an intrinsic value from relative valuation ratios? sorry its all a bit confusing :S

Answer 5

intrinsic value is not same as relative value

Answer 6

for a high growth company do you forecast the change in working capital and net capex at the same rate as operating income grows? :)

Answer 7

growth*

Answer 8

change in working capital better tied to revenues rather than income as income more volatile. necessary capex to be assigned according to what investments are required to achieve revenues you forecast when company reaches stable growth. calculations in attached doc written by damodaran.

Answer 9

hmmm it just seems so hard to keep growth constant with ROC and reinvestment rate
like which one do I determin first?? should reinevesment rate be capex and working capital as a % of operating income?? because that value coupled with my very high growth rate give me an ROC close to 100%!!!
sorry if that was a bit much, im really struggling :) :)