Hi all, which do you think is the correct method for PE valuation?
Most analysts use Method 1, which is to take your preferred PE Valuation, multiply it by 2-year Forward EPS and arrive at a price target, and hence an ‘upside’.
But I have also came across Method 2, which is basically taking the PE Valuation X 2 Year Forward EPS, and then adjusting it to today’s present value using the discount rate (or cost of equity) of the stock in question. This results in a downside instead.
Any thoughts? Thanks!