In this article I am going to analyze Dow Inc, which its ticker (DOW) based in its earning per share (EPS) and its (P/E) ratio to see how much its stock will worth in the 2027.
First, let see how does DOW’s EPS did in the past six year starting form 2019 in order to estimate its growth rate, as shown below:
As we can see from the above chart that Dow EPS has been dropped from almost 2.75$ from 2021 until it reached 0.46$ in Q3 in 2022 and broke the uptrend that created before, therefor, our valuation for its stock to year 2027 based in its EPS will not bee accurate.
Now let us move to the other criterion to evaluate this company which is by using its Sales and (P/S) ratio.
As we can see from the above chart that Dow sales has been increased from 3.03B in 2017 until it reached to 11.8B in 2022 with growth rate 31%.
Now that we have the growth rate of Dow sales in the last years, we are going to use this growth rate to estimate what will its sales be in 2027 ,which is five years from now by applying the following formula:
FV=PV(1+i)n
- Where
- PV = Dow sales in year 2022 = 11.8 Billion.
- i = growth rate of Dow sales estimated above = 30%
- n = years of investment = 5 years in 2027
By substitute the numbers estimated early in the above formula, I end up with Dow Inc. sales in year 2027 equal to 43.8 Billion$.
Now, I have to see what was (P/S) ratio that Dow did have in the last years, which as shown below:
Now we can estimate two scenarios for DOW stock price which is Bull market and the bear market.
For Bull market, I am going to take the highest (P/S) ratio which was 1.09 in year 2021, to see what will be the price of DOW stock in 2027:
Bull market DOW Stock’s price in 2027= (1.09)*(43.8) = 47.7$.
For Bear market, I will take the lowest (P/S) ratio which was 0.46 in year 2020, to see what will be the price of DOW stock in 2027.
Bear market Dow Stock’s price in 2027= (0.46)*(43.8) = 20.15$.
As of writing this article, DOW Inc. stock price is 57.19 $ which is above both Bull market estimated price and Bear market estimated price, therefor, I believe DOW’s stock is not a good opportunity for investment.
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