Wednesday 18 December 2013

My Target Price

For every stocks that I study, I will set my own target price to facilitate my buy and sell decision. I think everyone does that.

I will share it in my stock portfolio in this blog so that it will be easier for me to refer to when needed.

My target price is no rocket science. It is based on a very very simple calculation, which is my expected EPS x PE ratio which I think is fair.

Of course, my earning prediction for a company or PE value for an industry may not be accurate. Thus, DO NOT follow my target price blindly.

No one teaches me how to set a target price. I learn it from those free analyst reports available online. I aim to be modest with the target price and try not to be too conservative or aggressive. 

For now, I'll just set the target price for companies at their financial year end, and set a time frame for it to be achieved.

For example, Inari's financial year ends in June 30. So, my target price for Inari now will be for its whole FY2014 ends in June 2014. The time frame for the target price will be 3 months after June, which is September 2014.

Why 3 months after? It is because the financial results of each quarter will only be announced about 1-2 months after the period ends. The share price should respond to the financial result. 

The target price will change from time to time if there are some issues which may affect it significantly such as unexpected change in earnings or massive earning dilution.

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