Reading 42: Market-Based Valuation: Price and Enterprise Val method, center, leading, div, class

土豆妮

Session 12: Equity Investments: Valuation Models
Reading 42: Market-Based Valuation: Price and Enterprise Value Multiples

LOS m: Evaluate a stock using the method of comparables.

 

 

 

Proprietary Technologies, Inc., (PTI) has a leading price-to-earnings (P/E) ratio of 28 while the median leading P/E of a peer group of companies within the industry is 38. Based on the method of comparables, an analyst would most likely conclude that PTI should be:

A) bought as an undervalued stock.

B) sold as an overvalued stock.

C) sold short as an overvalued stock.

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The price per dollar of earnings is considerably lower than that for the median of the peer group, which implies that it may well be undervalued.

土豆妮

Proprietary Technologies, Inc., (PTI) has a leading price-to-earnings (P/E) ratio of 28 while the median leading P/E of a peer group of companies within the industry is 28. Based on the method of comparables, an analyst would most likely conclude that PTI should be:

A) sold or sold short as an overvalued stock.

B) viewed as a properly valued stock.

C) bought as an undervalued stock.

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The price per dollar of earnings is the same as that for the median of the peer group, which implies that it is likely properly valued.

土豆妮

Proprietary Technologies, Inc., (PTI) has a leading price-to-earnings (P/E) ratio of 38 while the median leading P/E of a peer group of companies within the industry is 28. Based on the method of comparables, an analyst would most likely conclude that PTI should be:

A) sold or sold short as an overvalued stock.

B) viewed as a properly valued stock.

C) bought as an undervalued stock.

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The price per dollar of earnings is considerably higher than that for the median of the peer group, which implies that it may well be overvalued.