Equity :Price Multiples Query further, solution, between, identify, understood

bleach

Refer Example 12,page 293, Volume 4 Equity book for CFA L2
Not able to follow solution 1-I understood till Stock A,C have P/E less S&P 500 but not able to get how does 5 yrs avg P/E helped further to identify the undervalued stock(between A ,C)
Can anyone explain this to me.
Thanks