CPI: The Stock Valuation

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The price/earnings ratio is another means by which a company can be valued. The principle is that companies of a similar structure, industry and growth rates should have relatively similar valuations in the market. Price/earnings ratios tend to be higher in bull markets, and lower in bear markets (Loth, 2012). However, these trends should be roughly the same for all competitors within an industry, assuming that their risk level is roughly the same. The P/E ratio for Procter & Gamble is 19.70, for Colgate-Palmolive it is 19.93 and the P/E for Unilever ADRs is 21.06. For Johnson & Johnson it is 17.86. This is a fairly narrow range, and the closer that CPI is to these companies the closer it should be in terms of its P/E. CPI's price/earnings ratio is 14. The beta for P&G is 0.44, it is 0.43 for Colgate-Palmolive and for Unilever ADRs is 0.78. For Johnson & Johnson it is 0.53 (MSN Moneycentral, 2012). Some of the disparity for Unilever may be because the company reports in euros, so there is some translation risk that creates more variability in that stock on the US exchange. CPI has revenue of $200 million and a regional US presence. This is significantly different from our competitors. Procter and Gamble has sales of $85.14 billion, Colgate-Palmolive sales of $16.73 billion, JNJ $65 billion and Unilever $61.12 billion. Additionally, these are global companies, especially P&G and Unilever. All three have much wider product lines and greater diversification than does
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