There are multiple ways to value a stock and one such way is the Earnings Per Share (EPS) approach. The EPS of a given firm is the amount of annual earnings available to shareholders (common share) provided on a per share basis (Smart, Gitman, & Joehnk, 2014). The EPS for DUK is 4.09 (see appendix 2). Using this EPS and the stock price as of March 22, 2016, the P/E ratio for DUK is 19.28. This means that for every dollar invested, one would expect $19.28 in return. However, looking at P/E as a function of one day in time would not be prudent, rather an investor would have a better feel for the company if they reviewed the trailing P/E or leading P/E. In the case of DUK the P/E ratios are 19.48 and 16.40 respectively (Yahoo! Finance,
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Additionally, information was provided about DUK and its competitor NEE within the scope of DuPont analysis. Based on the information presented within this document, the recommendation would be to purchase DUK. While the P/E forward trend and the Dividends-and-Earnings methods presented differing results, DUK is still a good buy because it has historically paid dividends and provided growth each year. It is not unreasonable to assume growth will continue, however, the actual rate of growth assumed in the Dividends-and-Earnings approach maybe higher or lower than expected. In fact, many analysts will agree that the combination of good dividend growth and earnings of the past will lead to the possibility of the same in the future and thus DUK is seen as a good investment (Debbas, …show more content…
DUK has made dividend payments for 90 straight years and for an investor who is looking for dividend income, DUK’s yield of 4.3% is appealing (Bollinger, 2016). As also noted by Bollinger (2016), the stock may not be a bargain today; however, as indicated in the P/E calculation, if DUK makes its potential return of 8-10% in the future, all DUK investors who subscribe to the Dividends-and-Earnings model will be happy. Additionally, Debbas (2016) provides that electric utility stocks have performed very well thus far in 2016; but they are not trading at a
Additionally, information was provided about DUK and its competitor NEE within the scope of DuPont analysis. Based on the information presented within this document, the recommendation would be to purchase DUK. While the P/E forward trend and the Dividends-and-Earnings methods presented differing results, DUK is still a good buy because it has historically paid dividends and provided growth each year. It is not unreasonable to assume growth will continue, however, the actual rate of growth assumed in the Dividends-and-Earnings approach maybe higher or lower than expected. In fact, many analysts will agree that the combination of good dividend growth and earnings of the past will lead to the possibility of the same in the future and thus DUK is seen as a good investment (Debbas, …show more content…
DUK has made dividend payments for 90 straight years and for an investor who is looking for dividend income, DUK’s yield of 4.3% is appealing (Bollinger, 2016). As also noted by Bollinger (2016), the stock may not be a bargain today; however, as indicated in the P/E calculation, if DUK makes its potential return of 8-10% in the future, all DUK investors who subscribe to the Dividends-and-Earnings model will be happy. Additionally, Debbas (2016) provides that electric utility stocks have performed very well thus far in 2016; but they are not trading at a