Examine the implications of analysts` projected five-year growth rate of 28 percent (EPS growth rate in 2010, 2011, 2012) discussed earlier within the framework of abnormal earnings growth (AEG) valuation applied to Google`s market price in mid-2008.
In mid-2008, Google`s stock was priced at $520 with analysts forecasting EPS of $19.61 for 2008 and $24.01 for 2009, resulting in a forward P/E ratio of 26.5. Analyst consensus indicated a robust five-year EPS growth rate of 28 percent. Utilize the abnormal earnings growth (AEG) model to estimate the intrinsic value of Google`s shares based on these growth assumptions.
Considering analysts` tendency towards optimism, especially for prominent stocks like Google, re-evaluate the 2008 and 2009 EPS estimates to uncover the implied growth rate in abnormal earnings growth (AEG) post-2009 embedded within the mid-2008 stock price. This analysis provides valuable insights into the implications and credibility of the forecasted 28 percent five-year growth rate by analysts.