On a particular date,FedEx has a stock price of $88.66 and an EPS of $6.34.Its competitor,UPS,had an EPS of $0.40.What would be the expected price of UPS stock on this date,if estimated using the method of comparables?

Question

Quizplus · Accepted Answer

The expected price of UPS stock can be estimated using the method of comparables by multiplying its EPS by the price-to-earnings (P/E) ratio of FedEx. The P/E ratio of FedEx is $88.66/$6.34 = 13.98. Therefore, the expected price of UPS stock is $0.40 * 13.98 = $5.59.

On a Particular Date,FedEx Has a Stock Price of $88