Alan, Alex, John and Bob's Approaches to Stock Valuation

What are the different methods used by Alan, Alex, John, and Bob to value the stock of Greatage Corporation?

From the given data, how do their approaches differ and what are their projections?

Alan's Approach:

Alan estimates the stock price to increase to RM75 by the end of the year with a 6% growth rate.

Alex's Approach:

Alex projects a growth rate of 20% for the next two years, followed by a reduction of 7% and a perpetual decline to 6%.

John's Approach:

John expects dividends of RM1.20, RM1.50, and RM2.10 in years 1, 2, and 3 respectively, with a selling price of RM50 in year 3.

Bob's Approach:

Bob will use the constant-growth model with a projected dividend growth rate of 6%.

Alan's Valuation:

Alan's projection of the stock price reaching RM75 by the end of the year suggests that he believes the stock is currently undervalued. His one-year holding period approach focuses on short-term growth potential.

Alex's Valuation:

Alex's varying growth rate projection over multiple years indicates that he is considering both short-term and long-term financial performance of Greatage Corporation. His method allows him to account for potential ups and downs in the company's dividends.

John's Valuation:

John's combination of dividend cash flow and earnings approach gives him a comprehensive view of the stock's value, considering both income from dividends and potential capital gains from selling the stock in year 3.

Bob's Valuation:

Bob's use of the constant-growth model simplifies the valuation process by assuming a steady dividend growth rate of 6%. This straightforward approach works well for stable companies like Greatage Corporation with consistent dividend history.

Conclusion:

All four brothers are utilizing different valuation methods to assess the same stock. Each approach provides unique insights into the potential value of Greatage Corporation, taking into account factors like growth rates, dividend income, and future selling prices.