You notice that Coca-Cola has a stock price of $ 40.68 and EPS of $ 2.04. Its competitor PepsiCo has EPS of $ 3.43. But, Jones Soda, a small batch Seattle-based soda producer has a P/E ratio of 35.2. Based on this information, what is one estimate of the value of a share of PepsiCo stock? g

Estimate Value of a share = $71.81

Explanation:

The value of a share can be determined using the price earning ratio model. According to this model, the price of a share is estimated as the EPS of the company multiplied by a representative P/E ratio.

Value of share = EPS * P/E

The appropriate P/E ratio would be that of a similar operator in the same industry, in this case, Jones Soda.

Hence the estimate value of share = 2.04 * 35.2=71.81

Estimate Value of a share = $71.81