To purchase a stock, its fairly priced price-earnings ratio should be

Question

Quizplus · Accepted Answer

A fairly priced stock should have a reasonable price-earnings ratio in relation to the company's earnings potential. A price-earnings ratio that is lower than average could indicate undervaluation, but it could also indicate an underlying financial issue. However, a price-earnings ratio that is higher than average could indicate overvaluation, which could lead to a potential decline in price over time. Therefore, a fairly priced stock should have a price-earnings ratio that is greater than the actual ratio, indicating that the stock is not overvalued.

To Purchase a Stock, Its Fairly Priced Price-Earnings Ratio Should