Stock Valuation at Ragan Engines Case Study Example | Topics and Well Written Essays - 750 words

Stock Valuation at Ragan Engines - Case Study ExampleThis difference in P/E is not justified given that Ragan has superior earnings and dividends compared to that of the industry i.e. EPS of $ 5.35 vs. $ 1.47 and DPS of $ 2.13 vs. $ 0.47 respectively. Relative valuation of Ragan puts the troupes armory terms at $ 65.64 which offers a significant upside from the intrinsic price of $ 38.55. whiz of the measures that Carrington and Genevieve can employ to annex the price of their shares before selling them to East Coast Yachts is to retain more than earnings and invest in the research and development of additional proprietary technology. Investing in book and improved technology will have the effect of reducing production costs for the organization, therefore large Ragan the opportunity to produce fuel saving engines. Such investment in technology will alter Ragan to increase their profit projections, therefore increasing the value of shares.In addition to that, retaining earning s for investment in more proprietary technology will give Ragan an edge over its competitors. This edge will kick in investors in the company to develop optimism, therefore ensuring that the prices of the shares maintain a high value.These strategies, however, will not increase the value of their shares when Ragan fails to record improvements after investing in technology. Since there will be no new(a) technology to give the company the competitive edge, the value of the shares will not increase.One issue is that the stock prices of Ragan have been undervalued because it is not listed in the securities exchange market. Ragan has a P/E of 7.21x, while the Industry has a P/E of 12.27x. Ragan posts higher earnings and value per share than the rest of the industry. Upon valuation, Ragans stock price is $65.64, compared to the figure bequeathd of $38.85. A solution to this issue lays in the reevaluation the value of Ragans stocks in order to provide the true value of the shares. In th e short run,