Company X has a P/E ratio of 16 in year 2013 and 16.5 in 2014.In 2015,its P/E ratio is 24.The best way to interpret these data is to conclude that:
A) the stock is overpriced and should be sold.
B) the stock has great growth capacity and should be bought.
C) other financial results and news should be examined to determine the cause of the P/E ratio change.
D) the stock is underpriced and should be bought.

Question

Quizplus · Accepted Answer

The best way to interpret these data is to examine other financial results and news to identify the cause of the P/E ratio change. The change in P/E ratio suggests that there may have been a change in the market's perception of the company's future earnings potential. It could be due to various factors such as changes in company's financial condition, market trends, economic conditions, or changes in management or industry. Therefore, more information is needed to make a decision regarding the stock.

Company X Has a P/E Ratio of 16 in Year