Question

What is one possible explanation of the differences in P/E’s between companies?

What is one possible explanation of the differences in P/E’s between companies?

Homework Answers

Answer #1

If the market has positive view of a particular company or a sector, the PE ratio of that company/sector will be high.

Financial strength & any company-specific risk. Companies which are perceived by investors as stronger/more stable at higher P/E ratios.

Growth or expectation of growth. Rapidly growing companies trade at high P/E ratios as it is based on future earnings potential.


So differences in PE between companies mainly come from the growth or expectations of growth and difference in riskiness of the companies.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. One of the two possible causes or explanations for the differences that occur between groups...
1. One of the two possible causes or explanations for the differences that occur between groups or treatments in ANOVA is that the differences are due to treatment effects. T or F 2. Another possible cause or explanation for the differences that occur between groups or treatments in ANOVA is that the differences occur simply due to chance. T or F 3. The validity of the results of a factorial ANOVA is dependent upon three assumptions, one of them being...
Contrast the differences between the northern lowlands and southern highlands on Mars (other than elevation) and...
Contrast the differences between the northern lowlands and southern highlands on Mars (other than elevation) and give one possible explanation for the difference
What are the reasons for the differences in accounting terms between companies? For example, Apple may...
What are the reasons for the differences in accounting terms between companies? For example, Apple may write (revenue), but another company may write it (sales). (Cost of goods sold) may be in another company (cost of sales) Why is that? What are the pros and cons of this diversity and difference?
Please new response and not one that is already posted. What are the major differences between...
Please new response and not one that is already posted. What are the major differences between job-order costing and process-costing systems? Give an example of a well-known company that might use job-order costing, and an example of a well-known company that might use process costing. Explain why you have chosen these companies, and do not choose companies that your classmates have already addressed in a post.
One of the major differences between a local police chief and a sheriff is that the...
One of the major differences between a local police chief and a sheriff is that the sheriff is elected, while the police chief is appointed. What are some of the possible problems with having a law enforcement official who, like any other politician, is responsible to voters? What are some of the possible benefits of this situation?
Describe the differences between merchandising and manufacturing  companies  with  regards  to  inventory the  calculation of  cost of goods sold. ?
Describe the differences between merchandising and manufacturing  companies  with  regards  to  inventory the  calculation of  cost of goods sold. ?
What are the differences between the concepts of space held by Leibniz and Newton? Explain the...
What are the differences between the concepts of space held by Leibniz and Newton? Explain the consequences of their views in terms of motion. What is “space” like in the two views? Describe and explain their thought experiments to defend their positions. Make references to the issues of this course given in lecture; that is, analyze your selected theory dispute in terms of scientific inference, scientific explanation, realism and antirealism, rationality of theory choice, and/or possible bias from external values.
What the differences between penicillin and tetracycline? 3- What the differences between penicillin and tetracycline?
What the differences between penicillin and tetracycline? 3- What the differences between penicillin and tetracycline?
Please provide at least 3 similarities and 3 differences between insurance companies and depository institutions both...
Please provide at least 3 similarities and 3 differences between insurance companies and depository institutions both in terms of their function as well as the make-up of their balance sheet.
Discuss and describe some of the differences between homes constructed by the British in the North...
Discuss and describe some of the differences between homes constructed by the British in the North verses homes constructed by the British in the South.  Provide an explanation of the differences and ONE reference image. Cite your sources for info and images.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT