In the price/earnings approach to stock valuation,
A) historical stock prices are utilized.
B) forecasted EPS are typically used.
C) the P/E ratio is computed by multiplying the stock price by the earnings per share.
D) the market P/E ratio, adjusted by beta, is used to value individual stocks.

Question

Quizplus · Accepted Answer

The price/earnings approach to stock valuation typically uses forecasted earnings per share (EPS) to estimate a stock's value, as it aims to predict future performance rather than rely on historical data.

In the Price/earnings Approach to Stock Valuation