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For the quarter-ending September 30, 2021, the “consensus earnings forecast” for PepsiCo, Inc. is $ 1.73 per share. PepsiCo, Inc. (Ticker Symbol “PEP”) manufacturs and markets beverages and food products, and on September 7, 2021, PepsiCo stock closed at a price of $ 154.53 per share.
As a general rule of thumb, you only want to consider investing in the 10% of firms that are most likely to “outperform” the market. Assume you are a believer in the Post-Earnings Announcement Drift, and only want to invest in companies that are likely to outperform the market by the highest margin.
Given the above, when PepsiCo, Inc. announces their earnings for the quarter, what is the minimum EPS at which you would decide to purchase PepsiCo, Inc. common stock?
Alternatively, suppose that you are interested in “short selling” stocks that are in the 20% of firms most likely to “underperform” the market. What is the highest EPS at which you would consider PepsiCo, Inc. to be one of these firms?
