In this article I am going to analyze Verizon Communications Inc. which its ticker (VZ) based in its earning per share and its (P/E) ratio to see how much its stock will worth in the 2027.
First, let see how does VZ’s EPS did in the past six year starting form 2017 in order to estimate its growth rate, as shown below:
As we can see from the above chart that EPS was dropped from 2017 where it was 7.36 $ to 3.76 $ in 2018, where it start to goes in uptrend from 2018 until it reached to 5.06 $ in 2022, so if we can eliminate the EPS in year 2017 we can estimated the growth rate for EPS growth rate for VZ which is equal to 7.71%.
Now that we have the growth rate of VZ’s EPS in the last five years, we are going to use this growth rate to estimate what will its EPS be in 2027 ,which is five years from now by applying the following formula:
FV=PV(1+i)n
- Where
- PV = VZ EPS in year 2022 = 5.06$.
- i = growth rate of VZ EPS estimated above = 7.71%
- n = years of investment = 5 years in 2027
By substitute the numbers estimated early in the above formula, I end up with Verizon Inc’s EPS in year 2027 equal to 7.33$.
Now, I have to see what was (P/E) ratio that VZ did have in the last six years, which as shown below:
Now we can estimate two scenarios for VZ stock price which is Bull market and the bear market.
For Bull market, I am going to take the highest (P/E) ratio which was 12.26 in year 2018, to see what will be the price of VZ stock in 2027:
Bull market VZ Stock’s price in 2027= (12.26)*(7.33$) = 89.86$.
For Bear market, I will take the lowest (P/E) ratio which was 5.63 in year 2017, to see what will be the price of VZ stock in 2027.
Bear market VZ Stock’s price in 2027= (5.63)*(7.33$) = 41.3$.
As of writing this article, Verizon Communications Inc. stock price is 40.27$ which is below both bear scenario and the bull scenario. Therefore, I believe it’s a good opportunity for investment.
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