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Ask Alan – Calculating the Target Price of a Stock

Alan answers a question coming from Dana of Ocala, FL. Dana writes… "My friend said that to compute the target price for Apple Computer you should multiply it by the forward P/E ratio of 11.57 and the earnings per share of 44.16, and that will leave us with a future price of $510.93. However, Yahoo Finance says the price target for Apple Computer is well over $700. How do you calculate this target price?"

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

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