If Epsilon Company's price-earnings ratio on common stock is greater than Iota Company's, then Iota Company would be expected to have the best potential for future common stock price appreciation.

Question

Quizplus · Accepted Answer

A higher price-earnings ratio indicates that investors are willing to pay more for each dollar of earnings, which could mean that the stock is overvalued. Therefore, a lower price-earnings ratio could indicate that the stock has better potential for future price appreciation.

If Epsilon Company's Price-Earnings Ratio on Common Stock Is Greater