The significance of a price/earnings ratio, lies in its comparative and predictive qualities. Specifically, when a company has an earnings multiple of 15 and the industry has an earnings multiple of 12, the company's stock is viewed as outperforming the industry.

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A price/earnings ratio can be used to compare a company's stock performance to that of the industry. A higher earnings multiple than the industry average suggests that the company is performing well and investors may have confidence in its future growth potential. Therefore, a company with a P/E ratio of 15 compared to an industry average of 12 is considered to be outperforming the industry.

The Significance of a Price/earnings Ratio, Lies in Its Comparative