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Stock A has a P/E of 13 and a PEG of 2. Stock B has a...

Stock A has a P/E of 13 and a PEG of 2. Stock B has a P/E of 30 and a PEG of .6. Given this information, which stock should you short?

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Answer #1

As per the details given in the question-
Stock B is Short

Stock A-
P/E ratio = 13 times, means investors are willing to pay 13 times of price of a company
Low PE ratio indicated that a company is availale at a low or cheap price as compared to price it should be, they are long on the company(other factor remaining constant)

Stock - B
P/E ratio is 30 times , means investor are ready to pay 30 times of price of a company
High P/E ratio indicates that stock is possible overvalued , investor would short the high P/E ratio stock (other factor remaining constant)

I hope this clear your doubt.

Feel free to comment if you still have any query or need something else. I'll help asap.

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