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STOCKS VALUATION METHOD


A company's future earnings is probably the most important factor in determining the future value of any given stock on the stock market. The EPS for a given stock is the total net income of a company divided by the number of shares outstanding.

Let's examine IBM's forecast results. When we sum up the dollar value of IBM's EPS for the next 4 QTRs, we get $14.41 and the last 4 QTRs of IBM generated $12.5 (Q3 2010-Q2 2011). These results suggest a possible gain of 15% in yearly earnings growth which suggests that by Q3 2012 IBM's stock could be valued at $213 and at Q3 2010, IBM's price was $185.

As new quarterly results become available (for all stocks), the forecast for the next 4 QTR will be recalculated and adjusted to take into account these latest results.

 

 

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The companies presented in this report were selected because of the their various degrees of EPS growth (as measured by the gain index).  We calculated the forward P/E ratio based on the next 4 QTRs  EPS forecasts.  This ratio can be used to evaluate future stock prices by comparing the forward P/E with the historical one.

Despite the recent volatile market conditions and the relative short time period passed since the forecast was made (August -November), there is a positive correlation between the price of the stocks and our forecast of EPS growth. The future values of stocks is a key factor to your investment sucesss whether you are expecting a BULL or BEAR market. The bottom line is, we can help you chose stock market winners.