RAH Inc. is not publicly traded, but the P/E ratios of it's 4 closest competitors are 15, 15.3, 15.7, and 16.5. RAH's current earnings per share are $1.50
They are expected to grow at 6% for the next few years. What is a reasonable price for a share of RAH stock?
Answer: An appropriate P/E ratio would be an average of the 4 competitors:
(15 + 15.3 + 15.7 + 16.5)/4 = 15.625. A reasonable price would be $1.50(1.06)(15.625) = $24.84.
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