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You are evaluating Wheelhouse Consultants and you note that the trailing twelve month PE is 13...

You are evaluating Wheelhouse Consultants and you note that the trailing twelve month PE is 13 and the forward PE is 11. Based on this, and all else equal, you can determine that:

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Answer #1

I can determine that the market is not providing for the similar valuation for the company in the future years because it will not be rewarding for the similar price for similar earning for the company and it can also be interpreted that the earning for company may have increased due to which the overall price to earning ratio would have been decreasing or it would also mean that the price of the company would not be increasing in the similar manner as the earning would have been increasing, so it is said that the past price to earning ratio is higher than the forward price to earning ratio and it would be indicating that the market is not rewarding for similar earning in the future years as it is trading at a lower price to earning ratio and it can also be interpreted that the overall earnings of the company has increased in terms of the price in future years.

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