Portfolios with Long and Short Positions Predicting Volatile Stocks

Predicting a Stock's Future Price

Some companies have a history of producing relatively steady, predictable earnings growth. Other companies have a history of producing earnings in a much more erratic fashion. Focusing on the steady growers takes much of the inherent unknown out of the prediction process and leads to a less volatile investment outcome. Predicting a stock's future price can be a simple function of two variables - its future earnings per share and its future price-to-earnings ratio (P/E ratio). Multiply the projected P/E ratio by the projected EPS and you get your projected price per share.
Source: http://www.investopedia.com/articles/stocks/09/steady-growth-stocks.asp; http://www.thomasmith.com/; http://www.testudoinvesting.com