Which approach for dealing with negative earnings

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Reference no: EM132024593

Suppose you want to value a firm using P/E ratios. You have a list of P/E ratios, prices market caps, earnings, etc. for the other firms in its industry, all of which are roughly similar in structure and operation, but vary significantly in size (some are quite large and many are very small). Several, unfort unately (mostly for them), have had negative earnings recently. If the firm you want to value is relatively large, which approach for dealing with negative earnings is most likely to produce a reasonable P/E ratio for valuation using comparables?

Average E/P yields and invert

Ignore non-positive earnings firms

Use the median, not the mean

Working with sums

Reference no: EM132024593

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