You recently learned in FIN 602 how to value stocks using the P/E multiples approach, constant dividend growth model, and corporate valuation model. On July 16, 2018, you tuned into CNBC financial TV channel and watched different financial analysts discussing the current valuations of Amazon, Apple, Google, Goldman Sachs, and the overall U.S. and European stock markets. However, you are puzzled because these analysts could not agree on the current valuations and end-of-year price targets for the four companies and overall stock market. For example, two analysts argued that Amazon and Goldman Sachs (an investment bank) are currently overvalued, while others reached the opposite conclusion. Their end-of-the-year stock price targets for the four stocks and overall market also varied widely.

Solve this puzzle and explain how these analysts (and stock analysts in general) can reach such very different conclusions on stock valuations and price targets.

Answer rating: 100% (QA)

The Price Earnings Ratio PE Ratio is the relationship between a companys stock price and earnings per share EPS It is a popular ratio that gives investors a better sense of the value of the company Th... View the full answer