Year 2020 2019 2018 2017 2016 2015 2014 2013 EPS...
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Year 2020 2019 2018 2017 2016 2015 2014 2013
| EPS | $2.30 | $2.97 | $2.39 | $2.13 | $2.11 | $1.91 | $2.01 | $1.75 |
| DPS | $1.04 | $1.00 | $0.96 | $0.85 | $0.81 | $0.80 | $0.77 | $0.74 |
| ROE | 7.9% | 10.8% | 9.6% | 8.4% | 9.5% | 9.1% | 10.0% | 9.4% |
where b is the retention rate and (1 b) is the dividend payout ratio. You will remember that ROE*b is closely related to the concept of sustainable growth rate. For 8% and 9% required returns, calculate the theoretical P/E ratio using average ROEs and average dividend payout ratios. Analysts estimate that a normal operating year EPS for FISI is about $2.75 per share. Based on this, estimate the intrinsic value range of the stock as P = P/E*EPS. Based on your result, briefly discuss what analysts are likely to recommend for FISI stock.
- The following theoretical P/E multiple formula will be briefly discussed in class: P/E = (1 b) / (R ROE*b)
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