A higher than normal price/earnings ratio could mean:
A) the company's shares are undervalued.
B) the market is expecting future EPS to be higher.
C) the market is expecting future EPS to be lower.
D) shareholders are receiving a high return.

Question

Quizplus · Accepted Answer

A higher than normal price/earnings ratio indicates that the market is expecting future earnings per share (EPS) to be higher, which is why investors are willing to pay more for the stock. This could be due to anticipated growth, improved profitability, or other positive developments that are expected to increase the company's earnings in the future. Therefore, choice B is the best choice.

A Higher Than Normal Price/earnings Ratio Could Mean