I need a formula for determining estimated stock price when I have an EPS number only. For instance, the EPS number "earnings per share" is created using a known number of shares, to solve for the EPS. In this case I have EPS and P/E ratio, but need to solve for unknown stock price.
What formula would that be?
Stock price = Earning per share * P/E Ratio.
Most of the time you will see in a listing the Stock price and the P/E ratio. The calculation of the EPS is left as an exercise for the student Investor.
What you need to do is go to yahoo finance and look at different stock's P/E ratios. You'll quickly see that the stocks can be sorted by this number. It would be an interesting exercise to get an idea of why P/E isn't a fixed number, how certain industries cluster around a certain number, but even this isn't precise. But, it will give you an idea as to why your question has no answer. "Annual earnings are $1. What is the share price?" "Question has no answer"
