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Basic Question 3 of 7
Chris is working on relative valuation analysis for Toyota. Below is the data he gathered for this purpose:
Under the method of average return on equity, Toyota's EPS should be ______.
User Contributed Comments 3
| User | Comment |
|---|---|
| katybo | I think BVPS should be 4.08. P/BV is normally a trailing ratio and 2005 is an estimation... |
| MasterD | If you used 4.08 then you would use the Ave ROE not including 2005's 10.8% |
| bbadger | Excluding 2005 estimates, Mean ROE = 21.4666%, times 4.08 = 0.87584 EPS |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
calculate and interpret alternative price multiples and dividend yield;
calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;
explain and justify the use of earnings yield (E/P);
describe fundamental factors that influence alternative price multiples and dividend yield;
calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;
calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;
evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;
calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;
calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;
explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;
calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
CFA® 2025 Level II Curriculum, Volume 4, Module 23.