How to Calculate Stock Target Prices - Pocketsense

Multiply the company's projected earnings by your estimated multiple. The earnings-per-share estimate times your adjusted multiple will equal ... MANAGINGYOURMONEYHowtoCalculateStockTargetPricesBy:JohnCsiszarUpdatedOctober29,2021•••MichaelNagle/GettyImagesNews/GettyImagesBy:JohnCsiszarUpdatedOctober29,2021ShareItShareTweetPostEmailPrintRelated6TipstoSaveUsingtheMostPopularFoodDeliveryAppsLearnMore→Calculatingstocktargetpricesreliesonablendofharddata,financialprojections,andindividualintuition.Althoughstocktargetsarefrequentlyadjustedandrarelyprecise,youcanusethemasguidepostsastothefortunesofastockanditsunderlyingcompany.Additionally,stocktargetpricesbasedonsolidfundamentalanalysiscanhelpyoudeterminewhetherastockisundervalued.​ReadMore:​HowtoGetCurrentStockPriceDeterminetheCompany'sEstimatedEarningsThebasisofanystocktargetpriceistheearningsoftheunderlyingcompany,asthisnumberplugsdirectlyintothecalculationforestimatingstockprices.Earnings-per-shareestimatesforallcompanies,particularlyforactively-tradedcompanies,areeasytofindinthefinancialnewsmedia.Ifyoucannotfindestimatedearningsonline,ontelevisionorinthefinancialpress,youcanalwayscallthecompany'sinvestor-relationsdepartment.Itwillbehappytoprovideyouwithasummaryofanalysts'earningsestimatesforthecompany.FindAverageIndustryEarningsMultipleAnearningsmultiple,alsoknownasa"price-earningsratio,"roughlytranslatestohowmuchinvestorsarewillingtopayforeachdollarofearningsforacompany.Popular,high-growthstocks,suchastechnologystocks,oftensellforhighearningsmultiples,asinvestorsanticipatehigherearningsreturnsfortheirmoney.Onthecontrary,low-growthstockssuchasutilitiesoftencarrylowearningsmultiples,asthereislittlechanceofdramaticgrowthinearningsatsuchpredictablecompanies.Usually,stockswithinadefinedindustrytradeatafairlysimilarearningsmultiple.Aswithcompanyearningsestimates,averageindustryprice-earningsratiosareavailableinthefinancialnewsmediaandfrominvestor-relationsdepartments.AddtheMultipleperAnalysisAlthoughcompaniesinanindustrytendtotradeatroughlythesamemultiple,sometradeatpremiumstotheaverage,whileotherstradebelow.Basedonyouranalysisofacompany'searningsgrowthrate,managementteam,newproductpipeline,andconsistencyofresults,youshouldadjustyourestimatedearningsmultipleforacompanyslightlyupwardordownward,toreflectitspositionrelativetoitsindustrypeers.​ReadMore​:HowtoCalculateRealStockPricesMultiplyProjectedEarningsbyMultipleMultiplythecompany'sprojectedearningsbyyourestimatedmultiple.Theearnings-per-shareestimatetimesyouradjustedmultiplewillequalyourstocktargetprice.Forexample,ifacompanyisestimatedtoearn$2pershareandyouestimateitsearningsmultipleat20,thenyourstocktargetpriceis$40pershare.ReferencesSeekingAlpha:PriceTarget:WhatItIs&HowIt'sSetPublic:WhatAreTargetPrices?WriterBioJohnCsiszarearnedaCertifiedFinancialPlannerdesignationandservedfor18yearsasaninvestmentcounselorbeforebecomingawritingandeditingcontractorforvariousprivateclients.Inadditiontowritingthousandsofarticlesforvariousonlinepublications,hehaspublishedfiveeducationalbooksforyoungadults.