Currently, Southern Foods has sales of $1.32 million, a net profit of $521,400, and 125,000 shares of stock outstanding. The sales and net profit are each expected to grow by 6 percent annually. however, the current trailing twelve months (TTM) P/S ratio is 8.69.

However, the current trailing twelve months (TTM) P/S ratio is 8.69. Based on the current P/S ratio, what is the current market price (P₀) of the stock?

Using the current P/S ratio of 8.69 (based on what the market is currently willing to pay for one dollar's worth of sales), what is the expected price (P₁) of the stock one year from now?

What is the current P/E ratio for Southern Foods?

Given the historical (5-yr avg) P/E ratio is 18.5, what is the expected price (P₁) of this stock one year from now?

Southern Foods reported a return on equity (ROE) of 12.0% for the last fiscal year. Also, they just paid a dividend of $2.50 per share. Using the firm's sustainable growth rate in earnings and the historical P/E ratio, what is the expected price of this stock one year from now?

Answer rating: 100% (QA)

SOLUTION To calculate the current market price P0 of Southern Foods stock we need to multiply the current PS ratio by the sales per share which is sales divided by the number of shares outstanding P0 ... View the full answer