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1. Chapter 7. Stock Valuation Coca Cola (KYSE: KO) PepsiCo (NASDAQ: PEP) (a) Find the most...

1. Chapter 7. Stock Valuation

  • Coca Cola (KYSE: KO)

  • PepsiCo (NASDAQ: PEP)

(a) Find the most recent P/E ratio of each company. Which one has a higher ratio?

(b) How would you interpret the ratio?


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Homework Answers

Answer #1

(A) The P/E ratio for Coca Cola is :

= Market price/ EPS

= 29.91

The P/E for pepsi co:

= 24.21

(b) The P/E ratio higher depicts that the stock is overvalued or that the investors are willing to pay a higher price for the share due to the growth opportunities available for the stock. So, Coca cola is either overvalue or the investors are willing to pay a higher price for this company as the company looks promising to the investos.

So, either Pepsi is undervalued or investors are confident about the future prospects of this company hence they are not willing to pay a high price for this stock.

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