Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1. Consider the following excerpt from a Prudential report on Wal-Mart, dated May 13, 2003. The report states:

We are maintaining our Hold rating on Wal-Mart as we believe the stock's current valuation of 28 times our 2003 EPS estimate of $2.01 adequately reflects the company's 13% 5-year EPS growth rate... Wal-Mart is currently trading at 28.2 times our 2003 EPS estimate of $2.01, a 57% premium to S&P 500. This is not far from the retailer's five-year average high premium of 59%. The stock is also close to its 52-week high of $59.30, achieved in May 2002. It is difficult for us to envision investors paying an even larger premium, particularly for 13% projected grower. We believe the stock will continue to hover around a 55% premium to the market multiple or 27.9 times. Using this valuation and our 2003 EPS estimate of $2.01 yields a 12-month price target of $56, up from $55.

Discuss the merits of the valuation technique mentioned in this excerpt, with reference to the contents of the material we studied so far in the course. Base your discussion on the following problems.

a) Is using a heuristic necessarily wrong in respect to valuation?

b) Do you think eBay is an anomalous case, and there are situations where the use of heuristics makes sense?

c) Is valuation part science and part art?

d) What advice would you give financial managers when it comes to valuing their firms?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M941729

Have any Question? 


Related Questions in Basic Finance

Suppose that you wish to buy stock and protect yourself

Suppose that you wish to buy stock and protect yourself against a downside movement in its price. You consider both a covered call and a protective put. What factors will affect your decision? You have inherited some sto ...

Explain why examining the earnings quality is important in

Explain why examining the earnings quality is important in valuation even though one uses cash flows for valuing projects and firms.

Faro technologies whose products whose products include

FARO Technologies, whose products, whose products include portable 3D measurement equipment, recently had 17 million shares outstanding trading at $42 a share. Suppose the company announces its intention to raise $200 mi ...

Luke is saving for a trip around the world for his family

Luke is saving for a trip around the world for his family and as of today has accumulated $2315 in a trip fund. His goal is to accumulate 4 times this amount to support the trip. Assuming that all of Luke's trip fund is ...

Modify the cpl lagrangian heuristic to account for the case

Modify the CPL Lagrangian heuristic to account for the case where the demand is indivisible (i.e. the demand of any successor node must be satisfied by a single facility). Is the modified heuristic still time-polynomial? ...

Please respond to the followinganalyze the major elements

Please respond to the following: Analyze the major elements of international trade to determine why there is more risk here than in domestic trade. Provide at least 3 examples. Describe one of the risks in detail. Make a ...

Explain the differences among the three means of

Explain the differences among the three means of terminating a futures contract: an offsetting trade, cash settlement, and delivery. How is a forward contract terminated? Explain the difference between hedge funds and fu ...

1 compare and contrast the role of erp systems and planning

1. Compare and contrast the role of ERP systems and planning systems in enhancing firm performance and competitiveness. 2. Compare and contrast the role of ERP systems and logistics execution systems. 3. Compare and cont ...

Wilsons antiques is considering a project that has an

Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, ...

1 what is meant by the term structural compression how does

1. What is meant by the term "structural compression"? How does this term affect logistics? 2. What is a horizontal company and how would this type of company be organized? What are the strengths of this type of organiza ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro