Investing Guide · Chapter 12
Navigating from Future EPS to Sticker Price
Apply the sticker price calculation step by step.
This chapter connects future earnings projections to today's purchase price while maintaining a safety cushion against unforeseen risks.
Future Market Price Calculation
Multiply projected 10-year EPS by the Price/Earnings ratio. For example, a Future EPS of $8 with a PE of 40 yields a Future Market Price of $320.
Sticker Price Derivation
Using the Rule of 72 with a 15% target return, the sticker price equals one-quarter of the future market price. This represents the fair value today that would double twice over a decade.
Margin of Safety (MOS)
Rather than paying the sticker price itself, target a 50% discount. Buying a dollar's worth of value for fifty cents provides essential downside protection.
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