Essay about Stock Valuation

1213 Words Oct 5th, 2015 5 Pages
Stock Valuation
Peachtree Securities, Inc. (B)
Laura Donahue, the recently hired utility analyst for Peachtree Securities, passed her first assignment with flying colors. After presenting her seminar on risk and return, any customers where clamoring for a second lecture. Therefore, Jake Taylor, Peachtree’s president, gave
Donahue her second task: determine the value of TECO Energy’s securities (common stock, preferred stock, and bonds) and prepare a seminar to explain the valuation process to the firm’s customers. To begin, Donahue reviewed the Value Line Investment Survey data. Next Donahue examined
Teco’s latest Annual Report, especially Note E to the Consolidated Financial Statements. This note lists TECO’s long-term debt
…show more content…
Therefore, many investors have turned to government bonds, mortgage-backed issues, and utility bonds in lieu of publicly traded corporate bonds. As a result, Donahue concluded that the effect, if any, of the increased concern about event risk will be to lower TECO’s cost of bond financing. Value Line provided the following information:
Teco’s recent price ws $38 per share with a P/E of 14.6 and a dividend yield of 4.8%. It’s beta is .60.
ROE Pay-Out
Ratio
1989 15.3% 67%
1990 16.8% 66%
1991 16.0% 67%
1992 15.0% 69%
1993 15.0% 70%
Estimated
95-97
16.% 67%
Earnings Per Share
March 31 Jun 30 Sept 30 Dec 31 Full Year Estimated
95-97
1989 .49 .62 .80 .45 2.36
1990 .48 .68 .80 .49 2.45
1991 .46 .67 .86 .56 2.55
1992 .47 .68 .90 .55 2.60
1993 .50 .72 .95 .58 2.75
3.30
Quarterly Dividends Paid Per Share
March 31 Jun 30 Sept 30 Dec 31 Full Year Estimated
95-97
1989 .335 .355 .355 .355 1.40
1990 .355 .38 .38 .38 1.50
1991 .38 .405 .405 .405 1.60
1992 .405 .43 .43 .43 1.70
1993 .43 1.90
2.25
Annual
Rates
Past
10-Years
Past
5-Years
Est’d ’89-’91 to ‘95-‘97
Revenues 1.5% 5.5% 5.0%
Cash Flow 6.5% 8.0% 4.0%
Earnings 6.0% 6.5% 5.0%
Dividends 7.5% 6.5% 6.0%
Book
Value 4.5% 3.5% 5.5%
ROE 16.2%
With these

Related Documents