Walk me through a future share price analysis

The purpose of this analysis is to project what a company’s share price might be 1 or 2 years from now and then discount it back to its present value.

1. Get the median historical (usually TTM) P / E of your public company comparables.

2. Apply this P / E multiple to your company’s 1-year forward or 2-year forward projected EPS to get its implied future share price.

3. Then, discount this back to its present value by using a discount rate in-line with the company’s Cost of Equity figures.

You normally look at a range of P / E multiples as well as a range of discount rates for this type of analysis and make a sensitivity table with these as inputs.