Understand how to properly find the value of a stock using the dividend growth rate is a fundamental building block in valuation. Using the same two companies, evaluate each stock using a constant dividend growth model.
Calculate the future growth rate for both companies.
Which stock has the better growth rate? Do you agree with this assessment? Explain. Support your answer with either a description of a new product growth or from past growth performance.
Calculate the future stock price for both companies.
From a time value of money point of view stand point what does the calculated stock price say about the marketâ€™s view on the time value of money for each stock?
Compare the calculated stock price with the current stock price for both companies.
Is either stock under or over priced? Explain.
Should an investor purchase either of those stocks?
Should one stock outperform the other?
Based on the ratings found in Phase 4, does one stock seem more financially healthy? Explain.
Does this financial health make a stronger case to invest in the stock? Explain.