9.9 Forecast Price
Implications for Investors
In the analysis provided in this chapter
the above assessment of IBM’s stock price is significantly higher
than current market price (234.74 versus 127.87).
So the question arises: based upon this analysis what is the
future stock price of IBM?
The answer to this question lies in the
Implied Expected Return number provided in Valuation Tutor’s
calculator. This is the
return predicted from investor in IBM’s stock at the current spot
market price. In the
above screen this is 0.1144 and this allows you to forecast where
you expect IBM to be trading in 1-year or later time.
Projected Stock Price for IBM in
12-months:
$127.87*1.1144 = $142.50
Important Disclaimer:
The above projections are computed from the assessed expected
returns resulting from a textbook analysis of IBM’s intrinsic value.
That is, the purpose of this exercise is designed for
classroom teaching/learning purposes.
Actual realized returns can vary substantially from what is
expected!