S
Sunshine76
Guest
Here's something interesting:
The market bounced in March 2003, Tesco was trading at 160p.
For the year 2003 Tesco did just under 14p p/s putting it on a multiple of 11.43.
For 2004 Tesco did 16.45p putting it on a forward multiple of 9.73.
If we compare that to this years forecast ( ending Feb 09 ) and the year after ( ending Feb 2010 ) we get the following:
2009 forecast ( this current year ) estimate is 27.83p X 11.43 gives 318p
2010 forecast ( from Feb 09 till Feb 10 ) estimate is 31.18p X 9.73 gives 303p
Ok so this isn't an exact science but if history repeats we can pick up Tesco in the 320's if not lower. What this does show however is that at it's worst the market values Tesco at about 10 - 11 times earnings which can be used to find the risk level in the investment. I for one am not concerned that Tesco could fall by 10% if I had bought at say 340p.
Historically the average P/E of Tesco over the last 5 years was 16.9 therefore if we take the 31.18 forecast for 2010 then we get a target price of around 527p on this multiple.
Try working this out at a rate of 10% eps compounded growth for the next 5 years and put that on a p/e of say 15. Nice answer isn't it ?
You could take it further by including reinvested divies.
The market bounced in March 2003, Tesco was trading at 160p.
For the year 2003 Tesco did just under 14p p/s putting it on a multiple of 11.43.
For 2004 Tesco did 16.45p putting it on a forward multiple of 9.73.
If we compare that to this years forecast ( ending Feb 09 ) and the year after ( ending Feb 2010 ) we get the following:
2009 forecast ( this current year ) estimate is 27.83p X 11.43 gives 318p
2010 forecast ( from Feb 09 till Feb 10 ) estimate is 31.18p X 9.73 gives 303p
Ok so this isn't an exact science but if history repeats we can pick up Tesco in the 320's if not lower. What this does show however is that at it's worst the market values Tesco at about 10 - 11 times earnings which can be used to find the risk level in the investment. I for one am not concerned that Tesco could fall by 10% if I had bought at say 340p.
Historically the average P/E of Tesco over the last 5 years was 16.9 therefore if we take the 31.18 forecast for 2010 then we get a target price of around 527p on this multiple.
Try working this out at a rate of 10% eps compounded growth for the next 5 years and put that on a p/e of say 15. Nice answer isn't it ?
You could take it further by including reinvested divies.