Chapter 9, Problem 5TCL

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Chapter
Section

### Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

# Estimating Exxon Mobil Corporation's Intrinsic Stock ValueUse online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions.In this chapter, we described the various factors that influence stock prices and the approaches that analysts use to estimate a stock’s intrinsic value. By comparing these intrinsic value estimates to the current price, an investor can assess whether it makes sense to buy or sell a particular stock. Stocks trading at a price far below their estimated intrinsic values may be good candidates for purchase, whereas stocks trading at prices far in excess of their intrinsic value may be good stocks to avoid or sell Although estimating a stock's intrinsic value is a complex exercise that requires reliable data and good judgment, we can use the Internet to find financial data in order to arrive at a quick "back-of-the- envelope" calculation of intrinsic value.5. To put the firm's current P/E ratio in perspective, it is useful to compare this ratio with that of other companies in the same industry. To see how XOM’s P/E ratio stacks up to its peers, refer to Google Finance's Related Companies screen. (If you click "Add or remove columns,” you will find that you can obtain comparisons of a number of key statistics for either the most recent year or quarter) For the most part, is XOM's P/E ratio above or below that of its peers? In Chapter -4, we discussed the various factors that may influence P/E ratios Can any of these factors explain why XOM's P/E ratio differs from its peers? Explain.

Summary Introduction

To explain: Whether the company’s P/E ratio is above or below that of its peers and the reason behind the company’s P/E ratio differs from its peers.

Introduction:

Profit Earning Ratio (P/E Ratio): It refers to the ratio between the price of a share of the company and the earnings on that share, which is earning per share of the company. In other words, it can be defined as the ratio between the price per share of the company and its earnings per share.

Explanation
• The peers of the company have the P/E ratio in the range of the 20ās, which is way higher than the P/E ratio of the given company, which is 16.03. Therefore, the companyās P/E ratio is below than the P/E ratio of the peers...

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