A firm with a higher than average PE ratio is generally expected to have
A) High stock price in relation to their prior year's earnings
B) Losses in the future
C) Rapid growth in earnings
D) All of the above
E) A and C above

Question

Quizplus · Accepted Answer

A higher than average PE (Price to Earnings) ratio suggests that the market expects higher earnings growth in the future, hence the stock price is high relative to past earnings. This indicates both A) High stock price in relation to their prior year's earnings and C) Rapid growth in earnings.

A Firm with a Higher Than Average PE Ratio Is