Normalized EPS

P/E ratio based on the normalized EPS = Current stock price / Normalized EPS 

• using the method of average EPS
Normalized EPS (based on average EPS) = average EPS over the sample period

• using the method of average ROE

Normalized EPS (based on average ROE) = average ROE over the sample period P/E ratio based on the normalized EPS = Current stock price / (average ROE over the sample period * BVPS (latest))

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(Question)

Year		2008	2007	2006	2005
BVPS		$25.58	$33.62	$37.54	$32.26
ROE		3.2%	4.0%	4.5%	3.9%

Based on the method of average return on equity (ROE), the normalized EPS is closest to:

Answer:

Year		2008	2007	2006	2005
BVPS		$25.58	$33.62	$37.54	$32.26
ROE	Average ROE = 3.9% (*1)	3.2%	4.0%	4.5%	3.9%
Normalized EPS	$1.00 (*2)

(*1) (3.2%+4.0%+4.5%+3.9%)/4 = 3.9%
(*2) 3.9% * $22.58 = 0.9976... = $1.00