NISM Certifications · NISM-Series-XV: Research Analyst · Valuation Principles
A stock trades at Rs 450 with EPS of Rs 30. The expected EPS growth rate is 15% per annum. What is its PEG ratio?
The PEG ratio is 1.0. The P/E is 450 divided by 30, which is 15 times, and dividing this by the expected earnings growth of 15 percentage points gives a PEG of 1.0, suggesting the stock is fairly priced relative to growth.
- A1.0Correct
- B15.0
- C0.5
- D2.0
Explanation
P/E = 450/30 = 15. PEG = P/E divided by growth rate in percentage points = 15/15 = 1.0. Giving 15 ignores dividing by growth, and 2.0 or 0.5 come from wrong ratios of growth and P/E.
Did you get it right without looking?
One question tells you little. A timed set on Valuation Principles shows your real accuracy, how long you take and where you lose marks.
More Valuation Principles questions
- A firm has enterprise value of Rs 5,000 crore, cash of Rs 400 crore, total debt of Rs 1,400 crore, and 50 crore shares outstanding. Assuming…
- A stock has a trailing EPS of Rs 25 and a book value per share of Rs 200. Its return on equity is therefore 12.5%. If the stock trades at a …
- A company expects to pay a dividend of Rs 12 per share next year. Dividends are expected to grow at a constant 5% per year forever, and the …
- A company's EBITDA is Rs 200 crore, total debt Rs 300 crore, cash Rs 100 crore, and market capitalisation Rs 1,400 crore. There are no minor…
- In the dividend discount model with constant growth (Gordon model), the value of a share today is computed as:
- Vihaan Ltd has a share price of Rs 360, earnings per share of Rs 24 and a dividend payout ratio of 40%. What is its dividend yield?