What is a Share Price Target?

What is a share price target

In this article we will discuss in detail about the share price target, What is a Share Price Target? How share price targets are calculated? methods used for the calculate the share price targets. Which factors are important to predict the future stock price prediction.

What is a Share Price Target?

As our website Stockpriceguru.com is talk about the future share price targets of various stocks where you can see the growth potential. In this article we will learn about share price target In detail.

Current market situation is the right time to discuss this particular topic as we can see many fundamentally strong stocks are at its bottom levels. Hence many peoples are interested to know how much more the particular stock will go in future. So everyone wants to understand what is a share price target is.

A share price target is an estimate of a particular stock’s price is expected to be at some point in the future. These are the potential prices or levels where that particular share will reach in that particular time period. It is nothing but the future price prediction or forecasts about the share.

Stock price targets are predicted by analysis of company business, its performance and potential. And are often used as a tool for investors to help make decisions about buying or selling a stock.

With the help of target prices we can make informed decisions to buy, sell or hold the particular stock to make maximum profit out of it.

You can check this interesting article : How To Analyze a Stock While Investing in Indian Share Market?

How we can calculate share price target?

There are many techniques or methods used to calculate the share price targets, including:

Fundamental Analysis –

Fundamental analysis involves the study of company’s financial statements, current financial standings which includes its earnings, revenue, and cash flow, to determine its intrinsic value. With the help of this study of past data we can estimate the future growth based on the earnings will be and accordingly we can predict share price target.

In fundamental analysis, earnings we are using PE ratio to calculate the share price target

The two most common P/E ratio used are:

  1. P/E ratio using the trailing 12 month or 4 quarters of earnings
  2. P/E ratio using the F1 or current fiscal year

The calculation of the P/E ratio is simply price divided by earnings.

For example: if a stock’s price is Rs. 30 and its earnings are Rs. 10, its P/E would be 3.

And if the stock’s earnings rose to Rs. 20, the P/E would now be lower at 1.5

So the logical conclusion we can get from the P/E ratio calculation is that since people had just been willing to pay 24 times earning especially if they believe the growth projections indeed are going to come to fruition and that is why this makes so much sense by using the P/E ratio because by seeing the differential you can calculate where that price should be.

Moreover if let’s just say that you expect the company’s earnings to grow even more than what is presently projected you can see something what’s known as multiple expansion and then you can estimate the target price should go even higher because you are anticipating and even higher multiple down the road.

As you can see if any specific company is performing good and its meeting their projections, you will absolutely see the price rise and which means the PE ratio rise. And as the certainty of the earnings become clearer

Technical Analysis –

Technical analysis mainly involves the stock’s price movement and its chart pattern study by using various strategy make predictions about future price movements. Technical analysis involves the investigation of demand and supply of particular stock affects its volume, price.

It is done with the help of historical trading activity or past movement of the particular stock because it trusts History repeats.

Technical analysts may use tools like moving averages, trend lines, and momentum indicators to help determine a share price target. These indicators are used in such way that we can identify the current market trends, like what is the support and resistance? What is the buyer’s volume and seller’s volume?

Support and resistance are the lines drawn to major touchpoints from where stock has shown reverse moments. So we can see the share price in that period was in that particular price range.

How share price is calculated - Technical analysis
How share price is calculated – Technical analysis

Key Takeaways:

  • A share price target is projected price of stock in future, which can be calculated by analyzing the past data of the company and its stock performance.
  • It can be calculated by Fundamental analysis and technical analysis using various techniques and tools.
  • With the help of share price target we can make informed decisions to buy, sell or hold the particular stock to make maximum profit out of it.
  • Share price targets of the same share can be different because there are various different ways to calculate the future prices, so everyone’s study might give different outputs.
  • In our website we have shared share price target for many companies which are leaders of sectors like LIC Limited, IT sectors leading company Wipro, Metal sectors dominant player Tata Steel

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