How to Calculate Stock Target Prices

Determine the company's estimated earnings. The basis of any stock target price is the earnings of the underlying company, as this number plugs directly into the calculation for estimating stock prices. Earnings-per-share estimates for all companies, particularly for actively-traded companies, are easy to find in the financial news media. If you cannot find estimated earnings online, on television or in the financial press, you can always call the company's investor-relations department. It will be happy to provide you with a summary of analysts' earnings estimates for the company.
Find the average industry earnings multiple. An earnings multiple, also known as a 'price-earnings ratio,' roughly translates to how much investors are willing to pay for each dollar of earnings for a company. Popular, high-growth stocks, such as technology stocks, often sell for high earnings multiples, as investors anticipate higher earnings returns for their money. On the contrary, low-growth stocks such as utilities often carry low earnings multiples, as there is little chance of dramatic growth in earnings at such predictable companies.Usually, stocks within a defined industry trade at a fairly similar earnings multiple. As with company earnings estimates, average industry price-earnings ratios are available in the financial news media and from investor-relations departments.
Adjust the multiple based on your analysis. Although companies in an industry tend to trade at roughly the same multiple, some trade at premiums to the average, while others trade below. Based on your analysis of a company's earnings growth rate, management team, new product pipeline, and consistency of results, you should adjust your estimated earnings multiple for a company slightly upward or downward, to reflect its position relative to its industry peers.
Multiply the company's projected earnings by your estimated multiple. The earnings-per-share estimate times your adjusted multiple will equal your stock target price. For example, if a company is estimated to earn $2 per share and you estimate its earnings multiple at 20, then your stock target price is $40 per share.

How to Buy Caterpillar Direct Stock

Obtain and read Caterpillar's DSPP prospectus before you enroll. The prospectus presents complete details of the plan, including all fees, terms and conditions. You can request a copy of the prospectus and enrollment form by mail by calling (866) 353-7849 (for TTY 1-800-231-5469). However, you can view the prospectus and a plan summary on the BNY Mellon direct stock purchase plan website (link below). When the page comes up, click on InvestorDirect Search, enter 'Caterpillar' and follow the prompts. You can choose to view the Caterpillar plan materials (prospectus) or plan summary.
Decide how much you want to invest. You can start with as little as $250 by check or electronic debiting. However, this requirement is waived if you set up monthly automatic debits. You can enroll by mail or use the enrollment wizard to sign up online (on the same webpage described in Step 1).
Enroll by filling out the enrollment and authorization forms. You will need to provide your personal information, including your Social Security number and bank account information. For electronic funds transfers, you must complete an authorization form. There is a one-time $15 setup fee. Once you complete the online form or drop a paper form in the mail, you're on your way to becoming a Caterpillar shareholder.
Make additional investments with deposits of as little as $25 (there is a monthly maximum of $10,000). When you buy Caterpillar stock directly, there is a $1-per-purchase fee ($2.50 for paper checks) plus 3 cents per share (as of 2009).