- 35 -
percent. Spiro concluded that the fair market values of
petitioner's stock was $293 per share.
We reject part of respondent's expert's opinion and accept
part. In the market method section of his written report, Spiro
stated that the "P/E ratio[17] is principally influenced by
earnings growth, with higher-growth companies trading on average
at higher P/E ratios." Spiro chose a price-to-earnings ratio for
Savings by comparing Savings' 1-year and 3-year growth trends to
the average of the selected companies' growth trends, and derived
a share price of $373.41 from that ratio.
In analyzing the data Spiro used to derive this value, we
find no statistically significant correlation between the seven
selected companies' growth trends and their price-to-earnings
ratios.18 Using the average of these companies' growth trends to
17Price-to-earnings ratio.
18The selected companies and their growth trends and price-
to-earnings ratios are as follows:
Growth Trends
Company 1-Year 3-Year P/E Ratios
California Bancshares, Inc. -18.73 5.58 11.02
Civic Bancorp -32.32 22.91 7.95
First Commercial Bancorp -25.91 11.64 5.75
The Pacific Bank 2.11 -1.24 8.01
Redwood Empire Bankcorp 148.56 32.22 9.02
University National Bank 1.54 3.21 9.64
Westamerica Bancorporation 14.35 38.99 9.05
There is no significant correlation between the companies'
growth rates and price-to-earnings ratios. Spiro's data does not
(continued...)
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