Question: World Wide Web Wares 4W for short is an online

World Wide Web Wares (4W, for short) is an online retailer of small kitchen appliances and utensils. The firm has been around for a few years and has created a nice market niche for itself. In fact, it actually turned a profit last year, albeit a fairly small one. After doing some basic research on the company, you’ve decided to take a closer look. You plan to use the price-to-sales ratio to value the stock, and you have collected P/S multiples on the following Internet retailer stocks:
Company ............. P/S Multiples ........... 4.5 .......... 4.1
Fixtures & Appliances Online ..... 3.8
Find the average P/S ratio for these 3 firms. Given that 4W is expected to generate $40 million in sales next year and will have 10 million shares of stock outstanding, use the average P/S ratio you computed above to put a value on 4W’s stock.

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  • CreatedApril 28, 2015
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