As posted last night,
The Net Present Value (NPV) at a discount rate of 5% for a company with an EPS in the next 5 years of $1, $2, $5, $12.50, and $25 is $36.96.
This is calculated by discounting each year's EPS back to its present value and then summing those present values.
Year 1: $1 / (1 + 0.05)^1 = $0.95
Year 2: $2 / (1 + 0.05)^2 = $1.81
Year 3: $5 / (1 + 0.05)^3 = $4.32
Year 4: $12.50 / (1 + 0.05)^4 = $10.27
Year 5: $25 / (1 + 0.05)^5 = $19.61
Sum of Present Values: $0.95 + $1.81 + $4.32 + $10.27 + $19.61 = $36.96
So yes, the current price of $7.90 is an extremely low valuation based upon the above modelling!
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