Forecasting the Stock Price for Publicly Traded Companies

Warrant Buffet uses the earnings per share (EPS) to project the stock price for publicly traded companies. One of his requirements to calculate the stock price is to have ten years’ worth of historic EPS. To be more specific, the EPS should be steady, not erratic. This article is going to demonstrate Buffet’s method for projecting the stock price.

To demonstrate an example by using the historical EPS for Boeing Company (BA):

Year	EPS $
2004	$   2.30
2005	$   3.20
2006	$   2.85
2007	$   5.28
2008	$   3.67
2009	$   1.84
2010	$   4.45
2011	$   5.34
2012	$   5.11
2013	$   5.96

Source: Yahoo. Finance

Begin by looking at the Boeing Company’s (BA) historical EPS as an example. It has a consistent EPS, and it fulfills the requirement to project the company’s stock price.

Step 1: Compound annual Growth Rate should be used to calculate rate of an investment over a specific period of time. You can use Texas Instruments BA II plus Financial Calculator to calculate the compound annual growth rate:

$  2.30                Present Value

$ 5.96                 Future Value  

9                        Number of Year

As a result, the compound annual growth rate is %11.16

Step 2: You should use Texas Instruments BA II plus Financial Calculator to project the EPS in 2022

$ 5.96                    Present Value

11.16 %             Growth Rate 

9                        Number of Year

Therefore: The Earning per share will be $ 15.44 in 2022

$ 15.44               Future Value

Step 3: To better project the stock price of 2022, you have to select the lowest price-earning (P/E) ratios between 2004 and 2013. The lowest P/E ratio between 2004 and 2013 was 11.7 (in 2008).  

If you take Boeing's projected 2022 per share earnings of $ 15.44 and multiply it by 11.7, you get a projected market price of $ 180.65 a share.

The question is: If the EPS is erratic, can we still use Buffet’s method to estimate stock price?

Scenario: Let us pretend the current year is 1995, and we are trying to project stock price for the Boeing Company in 2006.

Year	EPS
1995	0.575
1994	1.255
1993	1.830
1992	0.810
1991	2.280
1990	2.010
1989	0.980
1988	0.900
1987	0.690
1986	0.950
1985	0.840
1984	1.200

 Source: Ychart.com 

Step 1: Compound Annual Growth Rate should be used to calculate rate of an investment over a specific period of time. 

$ 1.200               Present Value

 $0.575               Future Value  

11                      Number of Year

Therefore, the compound annual growth rate is  -6.469%.
The compound annual growth rate is negative because the EPS was fluctuating during this period. As a result, it is very difficult to project the stock price in this situation in which the EPS is not growing at a steady rate. Let us continue the process to find out the stock price estimation.  

Step 2 :You should use Texas Instruments BA II plus Financial Calculator to project the EPS

$ 0.575               Present Value

-6.469%             Growth Rate  

11                       Number of Year

As a result,  the Earning per share will be $ .275 in 2006

$ .2755               Future Value

Step 3: To better project the stock price of 2006, you have to select the lowest P/E ratios between 1984 and 1995. The lowest P/E ratio between 1984 and 1995 was 7.403. 

If you take Boeing's projected 2006 per share earnings of $ .2755 and multiply it by 7.403, you get a projected market price of $ 2.03 a share

In conclusion, it is difficult to estimate the stock price for a company that has an erratic EPS. For instance, BA had an erratic EPS between 1984 and 1995, so it was hard to project its stock price in 2006. Based on Warren Buffet’s methodology, the stock price was estimated to be around $2.04, but the real stock price was $68.31.

 

How to make friends in your university?

How to make friends in your university?

International students often feel lonely and isolated from the entire community as well as from college life. Some of them deplore the fact that they cannot make a lot of friends on campus to hang out with, or are not sure if American students will accept them. In this article, my goal is to identify ways for international students to make friends and help them find it easier to integrate into society in America.

From personal experience:

During my first collegiate semester, I did not have a lot of American friends, and I did not know how to integrate into American society. I spent a lot of time reading books and watching a lot of documentaries about cross-cultural interactions. After the first year, I wanted things to change, but didn’t know how to make it happen.

International students usually ask: “How can I make friends and get involved in activities in my university?

Here are ways to get involved in college activities and also make friends:

1.      Each University has an International Students Club: I always encourage foreign students to attend the International Students Club meetings as well as the activities. By attending both, they will have the opportunity to meet students from their own country. You might ask: what if there isn’t an international students club in my university?  When I was a student at Sinclair Community College, the International Students Club was inactive. Therefore, I took the initiative with the approval of the former club advisor to re-activate the club on campus.  If there isn’t a club at your university, take the initiative to open it.

2.      Each University has a Student Activities Center “SAC”:  The Student Activities Center is composed of many clubs. For instance, if you like to talk politics, you should consider joining the political science club.  

Here are some Clubs that every University should have:

1.      Campus Ministry: If you are interested in learning about different religions, you may enjoy getting involved with the campus ministry. By attending their meetings, you will explore different religions.   Also, you might be interested in meeting students from your faith; your university might have various religious clubs such as a Christian, Jewish, and Muslim one.

2.      Fraternities and sororities: Fraternity clubs are where the membership is exclusive for males. The members will hold each other accountable for their standards, goals and achievements. The members will also help each other through difficult times.  Sorority clubs are where the membership is exclusive for females.  Standards and expectations are often similar to their male counterparts, and the members also hold each other accountable.

3.      Major clubs:  Find a club that relates to your major and passion. For example, if you are an accounting major, you need to join the accounting club in your university. The purpose of joining a major club is to meet professionals who might offer you an internship or a job upon the completion of your degree.

Finally, I encourage you to attend a club that you are interested in. As a result, you will make friends who will stand for and assist you in difficult times as well as share happy times with you.