On a certain day in February 2008, the Peabody Energy Corporation had a P/E ratio of 52.88. One of its competitors, Massey Energy Corporation, had a P/E ratio of 33.68. Which of the
Following is the most likely reason for this big difference?

Question

Quizplus · Accepted Answer

A higher P/E ratio, like that of Peabody Energy Corporation, suggests that investors are willing to pay more for each dollar of earnings, often because they expect higher growth in the future compared to a company with a lower P/E ratio, like Massey Energy Corporation. This can be influenced by factors such as a lower cost of capital relative to expected earnings growth, which makes future earnings more valuable.

On a Certain Day in February 2008, the Peabody Energy